Trending Now
We have updated our Privacy Policy and Terms of Use for Eurasia Group and its affiliates, including GZERO Media, to clarify the types of data we collect, how we collect it, how we use data and with whom we share data. By using our website you consent to our Terms and Conditions and Privacy Policy, including the transfer of your personal data to the United States from your country of residence, and our use of cookies described in our Cookie Policy.
{{ subpage.title }}
Biden & McCarthy both win in debt ceiling showdown
Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, DC shares his perspective on US politics.
Who won the debt ceiling showdown between President Biden and House Speaker Kevin McCarthy?
And the answer is everyone's a winner. President Biden, first and foremost, avoided a default, which would have been a terrible consequence for Biden politically and the US and world economy. Very happy that didn't happen. Biden can now spin the modest spending reductions in the bill that increased the debt ceiling as a bipartisan victory, which should potentially help in his reelection campaign as he tries to campaign as a quasi-moderate, which is what brought him to office in 2020 and he put the debt ceiling issue behind us for another two years until at least January of 2025, which is going to be after the next presidential election. And the US is likely to revisit a lot of these fiscal issues once again, using the debt ceiling as a point of leverage to achieve further spending cuts and potentially an extension of the Trump tax cuts that expire in 2026.
For Kevin McCarthy, he wins because he still has his job. Earlier in the year, he had a really tough time achieving the speakership vote, having to go through 15 rounds of votes on the House floor. But it turns out that he's a pretty popular guy among the Republicans, driving forward this deal with very modest spending reductions, despite initially promising very steep reductions, particularly in 2024. They tried to get 9% cuts. They ended up with about 0% cuts, but a 3% increase in defense. And this is a win for Republicans all over the place. There might be some cranky conservatives who don't like this deal and they could potentially threaten McCarthy's speakership later in the year. But for now, it looks like he's doing okay.
He's going to be on thin ice, though, and the fiscal issues are not over for this year because the deal included something called the penny plan, which would cut overall spending by 1% if there's no appropriations bills, which are the annual bills that are legislation that funds the government, passed by January 1st of next year. This will give the conservatives who are in favor of government spending an incentive to block any of these appropriations bills and it's going to mean McCarthy's going to be caught in between the two sides of the Republican conference, the conservatives who want the cuts and the rank-and-file members who want to see increased spending on defense and the appropriators who want to see even bigger increases across the board.
So, McCarthy's not out of the woods just yet, but he's in a pretty good position and a much stronger one than we would have thought in January.
The U.S. House Committee on Rules holds a hearing about the United States' debt ceiling.
House passes debt limit bill
The US House of Representatives on Wednesday night passed a bipartisan debt limit bill to avoid a government default. And after all the drama, it wasn’t even that close: 314 lawmakers voted in favor of the bill, while 117 opposed it. Interestingly, more Dems (165) backed the measure negotiated by House Speaker Kevin McCarthy with the White House than Republicans (149).
It’ll now go to the Senate for a vote before Monday, when the US Treasury has warned that the government will run out of money to pay back its debt.
To be sure, many lawmakers – on both the right and left – didn’t get what they wanted. But while some progressive Dems spoke out against the bill’s provisions that they say benefit the wealthy and ramp up work requirements for recipients of food aid, they stopped short of criticizing the Biden administration, instead placing blame for the bill’s shortcomings squarely on the GOP.
Republicans, however, have been at loggerheads in recent days, with members of the far-right Freedom Caucus panning McCarthy for giving too much to the Dems, and at least one calling for his ousting. Indeed, it was a blow for the House speaker that he didn’t even have enough votes from within his own caucus to pass a procedural step earlier in the day needed to advance the bill. He had to rely on Dem votes to push it forward.
So what now? Markets will likely respond well to the news. But anti-McCarthy Republicans are seething and have warned of a “reckoning to come.”
Ukraine drone attacks on Moscow imply they don't fear Russian response
Will recent Moscow targeted drone attacks lead Putin to escalate the war in Ukraine? Biden and McCarthy reached a deal. Is the US debt problem solved? After Erdogan's election, will it be more of the same for Turkey & its struggling economy? Ian Bremmer shares his insights on global politics this week on World In :60.
Will recent Moscow targeted drone attacks lead Putin to escalate the war in Ukraine?
Well, so far, Putin has been claiming that these are terrorist attacks like he did the recent raids in Belgorod region, also in Russia. Certainly, it's interesting to note that Ukrainians taking these actions imply that they don't believe that Putin can or will do much in escalation. Also, keeping in mind this seems to be indiscriminate targeting of residential areas. No Russians have been killed that we know of, so far. But this is tit for tat, the kind of behavior we've seen from the Russians, of course, committing war crimes all over Ukraine. Really hate to see the Ukrainians engaging in that kind of behavior. Should be condemned, frankly. Not what the Americans or what most NATO allies want to see. And also shows the limitations of how much influence NATO has over Ukrainian military decision making.
Something to keep in mind. Biden and McCarthy reached a deal. Is the US debt problem solved?
Well, first of course, it has to go through a vote. Should go through with majorities from both parties within a couple of days in the House of Representatives, much easier in the Senate. Does interestingly show that McCarthy and Biden have a very functional working relationship, better than anything we've seen since Boehner and Obama had a beer together at the White House. And by the way, they didn't work together as effectively as we see McCarthy and Biden, right now. Given all the partisanship, it's useful to remind people of that. The debt limit comes back, we'll be talking about it right after the 2024 election. No one's resolved this, at all. But nice to see that cooler heads can indeed prevail in what otherwise was going to be a serious problem for the US economy.
After Erdogan's election, will it be more of the same for Turkey & its struggling economy?
Well, its struggling economy is probably going to get worse, because of course Erdogan has spent so much money, so many giveaways, in the run-up to election to ensure that he would indeed win. And he did relatively easily. But that also means, given all the pressure on the lira, given all the pressure on their fiscal balance, and on their indebtedness with inflation rates up, and risk-off behavior globally, the Turkish economy's going to be under a hell of a lot of pressure. The potential for a financial crisis, especially as we get through the summer, out of tourist season where the Turks make a lot of money, and into higher energy use, there are going to be real challenges for these guys. Also makes me think that Erdogan will continue to be more moderate in how he plays broader geopolitics, as he needs supports from the Gulf states, needs support from the Americans, the Europeans. Doesn't really want to alienate or antagonize anybody. And so, he'll try to be flexible. He'll try to be seen as a statesman that works with everyone and gets as much leverage as he can from every component of that geopolitical equation.
- What follows the drone attack on Moscow? ›
- Biden returns to join US debt ceiling talks ›
- Turkey’s sultan Erdogan is not going anywhere ›
- Ukraine shows success with long-range drone attacks against Russia - GZERO Media ›
- How Ukrainians learn to pilot kamikaze drones that destroy tanks - GZERO Media ›
- Putin using Moscow attack as excuse to intensify war on Ukraine - GZERO Media ›
- Does Europe face a resurging terrorist threat after the Moscow attack? - GZERO Media ›
U.S. House Speaker McCarthy talks to reporters at the U.S. Capitol in Washington.
Debt ceiling deal comes down to the wire
There was much relief after President Joe Biden and House Speaker Kevin McCarthy announced on Saturday night that they’d agreed to raise the debt ceiling and avoid a default in the world’s largest economy by June 5, the date Treasury Secretary Janet Yellen says the US will run out of money to pay back its debts. But it’s clear that the ongoing crisis will come down to the wire. (For more on what’s in the proposed bill, see here.)
On Tuesday night, the bill narrowly passed in the House Rules Committee – a procedural step required before any legislation can be brought for a vote in the House. Two ultraconservative GOP lawmakers on that committee (out of nine) voted against the bill’s advancement. House lawmakers are now expected to vote on the bill this afternoon.
Yet again, McCarthy is experiencing the perils of presiding over a razor-thin majority in the lower chamber as he tries to corral Republican support for the bill that several dozen lawmakers from the far-right Freedom Caucus say gives too much away to the Dems. McCarthy needs a majority of 218 votes to get the bill through, meaning that dozens of Dems will need to back the legislation to move it along to the Senate for a vote. And making matters harder, he needs a majority of the majority – aka Republicans – to back the deal so as not to lose the confidence of his caucus and GOP leadership and risk being ousted from the job.
Meanwhile, progressive House Dems, many of whom are furious at the Biden administration for raising some work requirements for needy families receiving food benefits, are playing their cards close to their chests.
The Graphic Truth: Who blew up the US national debt?
On Saturday night, just days before the US government was set to run out of money, US President Joe Biden and House Speaker Kevin McCarthy reached an agreement to raise the debt ceiling. The deal is, as expected, a modest compromise that includes more spending cuts than Democrats were initially willing to make, but less than Republicans wanted.
In exchange for avoiding a catastrophic default and kicking the can down the road until Jan. 2025, the US government will keep nondefense spending almost flat in the 2024 fiscal year and increase it by only 1% the following year. The agreement will fully fund veterans care but nix unspent COVID money and claw back some IRS funding, expand (some) work requirements for SNAP beneficiaries, and fast-track environmental approvals for energy projects.
Now it only needs a thumbs-up from Congress this week. Despite opposition from progressives and the GOP's Freedom Caucus, the bill is expected to pass in the House and get overwhelming support in the Senate. But don't be surprised if we're having this conversation again right after the 2024 election.
Indeed, prior to the Biden-McCarthy deal, there was plenty of finger-pointing over who was to blame for the US creep toward fiscal purgatory. Democrats blamed Republicans for refusing to raise the debt ceiling without preconditions, while Republicans said that Dems’ overspending landed the country in this mess in the first place.
But a look at US federal debt compared to GDP over the past four decades – which highlights America’s ability to pay back its debt – shows that both Democratic and Republican spending and fiscal policies have fueled the country’s current imbalance. We look at these figures dating back to 1980.
World Bank's David Malpass on global debt & economic inequality
The world has a huge debt problem. Economic growth is slowing, but global debt is skyrocketing.
David Malpass sits down with Ian Bremmer on GZERO World for his final interview as president of the World Bank Group to discuss the debt crisis, his tenure at the World Bank, and solutions for combatting growing economic inequality.
Global debt has ballooned in the last two decades to an eye-watering $300 trillion due to years of low interest rates and cheap goods that made money easy to borrow. Then, along came the pandemic which stalled growth and a war in Ukraine that shot up food and energy prices, leading to runaway global inflation.
Rich countries reacted by injecting trillions of dollars of stimulus money into their economies, borrowing huge sums in order to do so.
"So much more of the world's capital is going just to pay off the debt of the advanced economies," Malpass warns, "That leaves less for everybody else, and I think that's a grave concern."
Malpass also spoke about China's emergence in the 21st century as the world's creditor, his proudest accomplishments as World Bank president, and advice for his successor, Ajay Banga. He also points to countries like India and Indonesia, which he believes are poised for significant economic expansion.
Can the world solve the global debt crisis before it's too late? Watch this full interview with David Malpass on GZERO World with Ian Bremmer.
- World faces "lost decade" of economic growth, says World Bank economist ›
- Graphic Truth: Global inequality ›
- US debt default would be "destabilizing," says World Bank's David Malpass ›
- Debt ceiling crisis: A default by any other name... ›
- Staving off default: How unsustainable debt is threatening human progress ›
- Is the global debt apocalypse here? ›
- Debt limits of rich countries hurt poor countries' growth, says World Bank's Malpass - GZERO Media ›
- Ian Explains: Why is global debt so high? - GZERO Media ›
- World Bank economist: The poorest are getting poorer globally - GZERO Media ›
Podcast: Fix the global debt crisis before it's too late, warns World Bank's David Malpass
Listen: In his final interview as World Bank president, David Malpass sits down with Ian Bremmer on the GZERO World podcast to discuss all things debt. No, not your credit card or mortgage payments, but the sovereign debt that governments use to pay their bills.
Global debt has ballooned to an eye-watering $300 trillion due to decades of low interest that made borrowing money extremely cheap, followed by runaway inflation driven by the pandemic and war in Ukraine. This dynamic has forced a lot of nations––particularly the poorest––to borrow more money than it can pay back.
In a wide-ranging interview, Malpass explains how the global debt crisis got so bad and whether there's any hope of averting economic disaster before it's too late. He also reflects on his tenure as World Bank president, advice for his successor, China's emergence in the 21st century as the world's creditor, and why the US debt limit law needs to be rewritten.
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, Stitcher, or your preferred podcast platform, to receive new episodes as soon as they're published.- Odds of a global recession? 50/50, says David Malpass ›
- Explaining the long history of US debt (& which other countries are saddled with debt) ›
- US debt default would be "destabilizing," says World Bank's David Malpass ›
- World faces "lost decade" of economic growth, says World Bank economist ›
- Inequality isn't inevitable - if global communities cooperate ›
- Graphic Truth: Global inequality ›
- Debt limits of rich countries hurt poor countries' growth, says World Bank's Malpass - GZERO Media ›
- Ian Explains: Why is global debt so high? - GZERO Media ›
- World Bank economist: The poorest are getting poorer globally - GZERO Media ›
US debt default would be "destabilizing," says World Bank's David Malpass
The debate in the US Congress around the debt limit and a potential default is like spending money on a credit card but refusing to pay the bill, according to David Malpass, outgoing president of The World Bank Group.
On GZERO World with Ian Bremmer, Malpass discussed the ongoing negotiations in Washington to avert a default and raise the debt ceiling before the federal government runs out of money on June 1. If the two sides can’t come to an agreement, Malpass says, the economic consequences will be “destabilizing.”
As a global financial leader, Malpass believes the US should consider rewriting the law so there’s no threat of default and adds that putting pressure on lawmakers might be the most effective way to get Congress to take action.
“If you’re over the debt to GDP limit, don’t pay salaries to senior government workers, to congressmen,” Malpass argues.
In this clip, learn why Malpass thinks Congress will come to a last-minute agreement and why minting a trillion-dollar coin to solve the problem is a very bad idea.
Watch the full episode of GZERO World with Ian Bremmer on PBS airing soon on US public television. Check local listings.
- Debt ceiling deal: long way to go in little time ›
- Pete Buttigieg explains: How the debt limit impacts transportation ›
- Chris Christie weighs in on US debt limit fight ›
- US debt limit: default unlikely, dysfunction probable ›
- Will the US default on its debt? Ask GZERO World's guests - GZERO Media ›
- Debt limits of rich countries hurt poor countries' growth, says World Bank's Malpass - GZERO Media ›
- Podcast: Fix the global debt crisis before it's too late, warns World Bank's David Malpass - GZERO Media ›