Posted on Sep 29, 2021, 10:10 a.m.
The countdown is now on: failure to act, the United States will probably run out of money as of October 18, Treasury Secretary Janet Yellen warned in a letter to parliamentarians. If the elected representatives of Congress do not raise the authorized debt ceiling by then or do not suspend it, “we expect the Treasury to find itself with very limited resources which would run out quickly,” he said. keeps the former president of the central bank.
Without being able to borrow to finance debt maturities and federal programs, the consequences would be potentially gigantic, both for investor confidence and for households receiving public funds (army, retirees, families, etc.).
Republicans and Democrats share the desire to avoid default, but not at all how to do it. The Treasury letter was made public the day after the Republicans refused to vote in the Senate for a bill passed in the House of Representatives which proposed to suspend the debt ceiling. For weeks, the leader of the Republican minority in the Senate, Mitch McConnell, had warned that he would block him. He thus wants to leave the responsibility to the Democrats alone to take note of the soaring public debt, and point the finger at the future spending plans of the Biden administration.
“Other measures this week”
The Democrats recall for their part that the suspension or the raising of the debt ceiling is a usual and bipartisan procedure. Democrats voted it three times during Donald Trump’s tenure, most notably when Republicans funded their massive tax cut plan with more debt.
“Trump has accumulated about 8 trillion in new debt. Rather than paying the bills, Senate Republicans voted to default, ”said Senate Democratic Majority Leader Chuck Schumer. “We will take other measures this week to raise the debt ceiling and avoid any economic damage,” he pledged.
Democrats can in theory pass the measure without Republicans’ help, but the legislative process will take time and energy. An additional difficulty, while the majority has been struggling for weeks in internal negotiations between the most moderate elected officials and the left wing, in order to find a compromise on the investment plans proposed by Joe Biden and which were to be voted on in starting this week.
Mid-term elections
A file on which the majority will probably play its record at the time of the legislative elections of mid-term, in November next year. The Senate gave its approval this summer to a plan to rebuild roads and bridges worth $ 1.2 trillion (including $ 550 billion in new spending), but it has not yet been adopted by the House. And the scale of the so-called “human” infrastructure investment plan (financial assistance for childcare, free university studies, etc.), proposed at 3.500 billion dollars, still does not meet with consensus within the Democratic camp.
With short majorities in the House and even more in the Senate, the two leaders Nancy Pelosi and Chuck Schumer are struggling to put all the pieces of the puzzle together. Joe Biden has been monopolized in recent weeks by international issues, and in recent days he has hardly played the role of arbiter or rallied the Democratic troops.
Democratic leaders in Congress were also debating on Tuesday to lift the threat of a shutdown of federal services, which could materialize on Friday. To do this, Congress must find a quick way to extend budget funding for the new fiscal year, which starts on 1is October in the United States.
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