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Ian Explains: The debt ceiling
Treasury Secretary Janet Yellen announced that her department had begun using extraordinary cash management measures to prevent a credit default until June 5th, but the clock is ticking. If Congress fails to increase the debt ceiling by the time the Treasury runs out of cash, then the US government could default on its loans for the first time in history, Ian Bremmer explains. Not only would this shake investor confidence in US bonds, raising the prospect of an American recession, but because US debt is the cornerstone of the world economy, it could also spark a global financial calamity.
So, what’s the holdup? Politics, of course. Republican House Speaker Kevin McCarthy, who handed the hard-right delegation of his party everything short of a kidney to secure his leadership role, is signaling that the only way Republicans will agree to increase the debt ceiling is if President Biden works with them on spending cuts in the federal budget—a budget that has grown nearly 30% over the last three years.
“I don’t know anyone who agrees with the President that we should just raise the debt limit and have no negotiations. That they believe there’s no area in government where we can eliminate waste.”
McCarthy’s senior-most ally in the Senate, Minority leader Mitch McConnell, has plenty of experience mudwrestling over the debt limit during the Obama years (apologies for that mental image). But interestingly, he’s not touching this latest squabble with a ten-foot pollster.
President Biden, for his part, has made clear that he’s not going to, as he puts it, let a far-right Republican House hold the American economy hostage. But it’s clear that the fight over the debt ceiling is just the first of many bitter government standoffs to come, given McCarthy’s razor-thin majority in the House and the Democrats’ control of the Senate and White House. What happens, you ask, when Congress must tackle crises far more urgent and unexpected than a long-awaited debt-ceiling increase? And what can the more moderate Republican members of Congress do to rein in their hard-right colleagues?
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Congressional spending cuts | US Politics :60 | GZERO Media
From $3.5 trillion to $2 trillion: Cuts to US spending bill mean less money for families
Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, shares insights on US politics:
What does it actually mean to cut $1 trillion from the Democrats' $3.5 trillion social spending bill?
President Biden has proposed one of the most ambitious expansions of federal spending in recent memory. If he gets everything he wants, it would probably be the largest expansion of government since the Great Society, but he's not going to get everything he wants. Democrats have basically said they cannot do all $3.5 trillion in spending. They're probably going to end up around $2 trillion. So what gets cut? Well, we don't know yet. There's kind of two ways to go about this. They could either cut the number of programs that have been proposed, doing fewer things with more money on a permanent basis, or they could try to do more things, each program getting less money and potentially doing them on a temporary basis. So, a future Congress would have to extend it. What does this mean for you? Well, a lot of the money in here is designed to go directly to families, either in the form of cash payments, through the tax code, the Child Tax Credit and the Earned Income Tax Credit, or subsidies for things like child care, early childhood education, and community college. And if you cut these things back, it means less money is going to go out the door to the American people. It also means less tax increases to finance it. So the implications of what's being proposed could actually end up being a big deal for a lot of Americans who would qualify for benefits under these new programs.
More American law enforcement officers have died from COVID-19 than from other work-related causes. What is happening to them?
It turns out police officers really reflect the rest of society. They tend to be a little bit more conservative than the general population, and they read the same misinformation about the coronavirus vaccine that the rest of us do. So what you've seen, as you've seen in the case of other unions and other workforces that have tried to mandate vaccines and force their workers to protect themselves against the coronavirus, is some resistance on the part of police officers, who also happen to be in a dangerous line of work. There've been many stories of unionized workforces resisting vaccine mandates. The New York teachers union protested the mandate to the mayor a couple of weeks ago. There were rumors that a slowdown among Southwest pilots that happened last weekend was related to the vaccine mandates. Although those rumors have generally been unfounded, and could have more to do with the way that Southwest manages its airline fleet. However, this is a really common theme and it's going to continue to be common as individuals push back against these mandates, putting themselves at risk of catching the coronavirus.
Moderate Democrats will determine the infrastructure bill's fate
Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, shares insights on US politics:
What happened with the infrastructure bill in the House this week?
The infrastructure bill, $550 billion in new spending on infrastructure, roughly doubling the amount of money that the US spends on roads, bridges, tunnels, ports, airports, water infrastructure over a five-year period was scheduled for a vote on Monday of this week. That was later delayed so that Speaker Nancy Pelosi could negotiate between progressives in her caucus and moderates, the moderates who wanted to get the bill done quickly. It was bipartisan.
They see it as a huge win and it was necessary to reauthorize highway spending for the fiscal year 2022, which begins on October 1st. The progressives support the infrastructure bill, but they see it as leverage for a much larger social spending package that President Biden is pushing. Unfortunately for the progressives, their appetite is a little bit larger than the stomach of the Democratic Party. They started at $6 trillion. They compromised down to a $3.5 trillion amount, but there are some conservative Democrats who are saying they won't spend more than $1.5 trillion, and there are other conservative Democrats who are giving strong hints that they don't want to do this bill at all.
Not a lot of trust between Democrats right now, which means that the floor vote on the infrastructure bill was totally derailed this week. Now, what's next is they have to try to find common ground to see if they can find a way to advance on the social spending package in order to get the infrastructure bill done. That could take weeks. That could take months. This is probably something we're going to be talking about through the end of the year. Democrats are going to have to compromise. You're probably going to get somewhere much lower than where the progressives are because they have very narrow margins in the House and Senate. This is not a majority that can afford to lose even a single vote. Because of that, it means their most moderate members are going to be the ones that determine the tune that everybody else dances to.