The traditional summer season of budget wars begins in America, which this year will be enriched by arguments over new infrastructure reform and an increase in the national debt ceiling in August
Biden’s team reached a fragile compromise between moderate lawmakers from both parties after long negotiations. They agreed to allocate less than $600 billion for infrastructure. This is three times less than the budget of the plan originally proposed by Biden.
Of this money, 300 billion will be used to rebuild the transport system, and the rest will be used to patch holes in related industries and subsidize green energy. Biden had to temporarily shelve the unpopular idea of raising taxes in a crisis that Congress refused to support.
The left-wing Democrats expectedly felt cheated. After all, they had just unveiled their own $10 trillion reform blueprint, criticising Biden’s original plan as too moderate. And now it turns out that the final reform will be even more unsightly and moderate.
Alexandria Ocasio-Cortez poked fun at supporters of the “infrastructure consensus” by pointing out that it was supported by only white lawmakers. And stating that only corporations and institutions of “structural racism” in the US would benefit from this reform.
In the coming weeks, a confrontation will break out in Congress between a motley right-wing and left-wing opposition to infrastructure reform on one side – and a centrist swamp on the other. These tensions will be exacerbated by the need to pass a new budget in September.
Lawmakers also have to raise the national debt ceiling, which has jumped to $28 trillion or 127% of American GDP during the pandemic. Any additional cash infusion will only accelerate the growth of debt and inflation. The latter is already at a 13-year high, and 83% of Americans consider it the biggest problem of our time.
Failure to deal with the national debt or budget in time will carry the risk of a technical default on US Treasury obligations – or a new government shutdown. The weak and slowly recovering US economy will certainly not benefit from such possible shocks.
Malek Dudakov