A perfect storm looms over the US Congress.The political battle over the debt ceiling and the race against time to raise it to avoid a default They have had unsuspected consequences, such as the withdrawal of a billion-dollar provision promised to Israel to reinforce and modernize the Iron Dome anti-missile system. It was the commitment that Israeli Prime Minister Naftali Bennet took from the White House after his first official visit to President Joe Biden in late August.
Forced to cut the budget due to criticism from the Republican opposition, House Democrats will eliminate this provision, originally included in a bill to keep the federal government funded until December 3, and suspend the debt limit it would have assigned. that aid to Israel. Otherwise, the first world power may be without funds in early October, which would have very serious consequences for the US economy itself, but also for the world economy.
The debt ceiling is the amount of debt from which the country can no longer issue new loans to finance itself, which prevents it from meeting its payments. It is not the same as the shutdown, or closure of the Administration – the suspension of services of the federal Administration when Congress does not reach an agreement on its budget -, but this year they coincide, to give a new headache to Biden. The deadline to reach a budget agreement is September 30. It should be remembered that the Biden Administration’s budget proposal is ambitious, around six trillion dollars.
That’s why the activity of the US Congress is frenzied these days. To avoid the closure of the Administration, which paralyzes practically all public services, the House plans to adopt this week “a law to finance the federal government until December,” said Democrat Nancy Pelosi, Speaker of the House on Monday. This bill also includes suspending the debt ceiling “until December 2022,” according to the veteran Democrat.
The debt ceiling adjustment aims to satisfy the obligations committed by the federal government, such as the bipartite assistance plan against covid-19 adopted in December 2020, still under the mandate of Donald Trump, as well as periodic payments to beneficiaries from social security and veterans, Pelosi recalled. In other words, guarantee vital funding to keep millions of Americans afloat. Congress is the only body authorized to adjust the debt ceiling.
Not even buying time with these adjustments, Democrats are guaranteed the support of the Republican opposition for the colossal infrastructure and social coverage plans of the Biden Administration. Republicans’ rejection of a $ 3.5 billion outlay to fund ambitious social programs is not the only obstacle Democrats face; also the opposition of some coreligionists to what they consider a waste, for fear that the deficit will skyrocket or rejection of an increase in taxes on the highest incomes. Even through the procedure known as “reconciliation” – which saves the mandatory two-thirds majority in the Senate – they see it feasible to carry out the bill if the opposition of the more moderate Democrats persists.
But, with negotiations stalled, the September 30 deadline is becoming increasingly pressing. To convince their own and others, the Biden Administration reminds again and again that the debt ceiling concerns already approved expenses, including some inherited from the previous Administration, such as the second pandemic rescue plan, and not future ones. . But for the moment the first direct victim is the prime minister of Israel, who sees the billion dollars promised to modernize the Iron Dome evaporate. The cancellation of the aid is due to pressure from the most progressive faction of the Democrats, according to sources cited by the portal The Hill, and it has displeased the more moderate or centrists, who consider the Iron Dome “protects Israeli civilians from terrorist attacks”, consider the same sources. The fissure between the two souls of the ruling party, again exposed.
Washington has reiterated the risk of “a historic financial crisis” if an agreement is not reached, as the US would be unable to honor its financial commitments as of mid-October. The Secretary of the Treasury, Janet Yellen, has stated in the same sense in an opinion article published on Monday in the newspaper The Wall Street Journal, in which it evokes an eventually apocalyptic scenario, with rising interest rates, the stock market crash, soldiers and retirees without income and the destruction of millions of jobs. In short, a recession in the making in the US The head of the Economy of the Biden Executive has also warned of the consequences that this would have for the world economy, when it tries to overcome the recessive impact of the pandemic.
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