As it happened in 2011 and 2013 -during the administration of the Democrat Barack Obama-, it is expected that once the precipice reaches the limit, when the country looks into the economic abyss, there will be a last-minute movement to avoid the non-payment of the debt of States. United. In three weeks, on October 18, if both houses of Congress do not reach an agreement, the nation would stop paying its debts for the first time in history. Meanwhile, time is ticking and Congress is playing with fire by getting dangerously close to default.
Faced with such a scenario, the US Secretary of the Treasury, Janet Yellen, warned this Tuesday that it is “likely that the Treasury will exhaust its extraordinary measures” if the Capitol does not act to increase or suspend the debt limit before October 18. Raising or suspending the debt limit, something that can only be authorized by Congress, does not give the green light to new federal spending, but allows the Treasury to settle the debts already contracted, including, for example, those inherited from the Trump Administration, as the second pandemic rescue plan.
Republicans approved three of those increases or suspensions of the debt ceiling during the Donald Trump administration, under which the national debt increased by approximately $ 8 trillion. The debt ceiling is the amount of deficit beyond which the country can no longer issue new loans to finance itself, which prevents it from meeting its payments.
Then, the power that dominates the world economy would face “probably a financial crisis and an economic recession,” according to a letter that Yellen has sent to the Speaker of the House of Representatives, Nancy Pelosi. That the United States runs out of funds will not only have very serious consequences for its economy but also for the world economy. “It is imperative that Congress quickly address the debt limit,” says the Secretary of the Treasury in her letter. It was Pelosi herself who warned last Sunday that the week that was about to start would be “hellish.”
Infernal because while broadening the debt ceiling is being negotiated, at the same time the budget that keeps the federal government financed is being debated, a game on which Democrats and Republicans (although neither moderate Democrats nor leftist Democrats) cannot agree. So the clock is ticking and the famous is feared shutdown, the closure of the Administration, in short, the suspension of federal services. The deadline to reach a budget agreement is September 30, this Thursday, the last day of the fiscal year.
What happens this week can easily define the presidency of Joe Biden. At stake is the infrastructure investment package of one trillion dollars, supported by the Republicans, and another of much more ambitious social spending, of 3.5 trillion, defended alone by the Democrats, or some Democrats, since it has the fatal derived from being the object of friction within those ranks, where the left wing conditions its support to the entire 3.5 trillion social spending package going forward. Biden’s dream of reform would be the largest expansion of social coverage in the United States since Lyndon B. Johnson’s Great Society program in the 1960s.
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