America is about to go through another dramatic period of raising the national debt ceiling. On 31 July, the current debt limit, set in the distant pre-crisis year of 2019, expires. If Congress fails to deal with it in time, the US could face a technical default
Lawmakers passed a law back in 1917 obliging Congress to set the national debt ceiling. It was supposed to limit rising government spending this way. Since then, Congressmen have raised the debt ceiling 74 times and it has become routine.
However, with today’s culturally polarized society, even such formal procedures are getting harder and harder to get through Congress. In 2011, America almost defaulted on its obligations, because lawmakers managed to raise the debt ceiling at the very last moment.
Now the situation is worsened by the fact that the U.S. debt during the one and a half years of crisis has increased significantly and is approaching $30 trillion, or 130% of GDP.) And the balance of power in Congress is split almost in half: the Democrats have only a shaky majority in both chambers.
Last year, the US budget deficit exceeded a trillion dollars for the first time. This year and over the next few years, it is expected to be $1.3 trillion to $1.8 trillion. By comparison, just 20 years ago, the entire U.S. government budget was equal to what its deficit alone is now.
Senate Republican leader Mitch McConnell has already announced that none of his party colleagues will vote to raise the national debt ceiling. The Democrats technically need 60 votes, which they don’t have. Now they have to somehow bypass the procedures to raise the national debt by a simple majority vote.
What’s worse, they have to pass a new draft budget and spend trillions of dollars on “infrastructure reform” in a very short time frame. All in all, it is going to be a very tumultuous and scandalous end to the summer when nothing much ever happens in Washington.
If the vote on the national debt is thwarted, the U.S. government will have literally weeks to avoid default. Biden will try every trick to prevent it – because even the threat of such a catastrophe could freeze the entire bond market and lead to a financial collapse.
Malek Dudakov