The US Senate approved on Thursday evening (local time) an increase in the debt limit by 480 billion US dollars (415.15 billion euros) by the beginning of December. A vote in the House of Representatives is still pending, here approval is a matter of form. The problem has only been postponed.
This was preceded by violent quarrels between Democrats and Republicans – they blame each other in the highly dangerous conflict, which could have serious consequences for the global economy. The two parties finally reached a temporary deal on Thursday. The vote on the agreement was narrow with 50 to 48 votes along the party lines – no Republicans joined the Democrats. However, the increase could only be put to a vote beforehand with the help of the Republicans.
“It would be unthinkable”
Treasury Secretary Janet Yellen had warned of a possible financial crisis and recession should the US government fail to service its debts for the first time. According to your ministry, the US would have run out of money on October 18, that is, in a week and a half. For the first time in its history, the US government would then no longer be able to pay its debts. “That would be absolutely catastrophic, it would be unthinkable,” Yellen told CNN on Thursday evening. “What we’re really talking about here is whether the government can be trusted to pay its bills.”
The current debt ceiling is around $ 28.5 trillion. Biden’s Democrats actually wanted to lift the border by December 16, 2022. In order to bring this project to the vote in the Senate in the regular way, they also need votes from Republicans. Their parliamentary group leader Mitch McConnell refused to approve. He also repeatedly points out that the Democrats could contest the entire process with their simple majority in the Senate through a special procedure for budget issues. The Democrats are opposed to this. They fear that the procedure is too risky and could lead to a number of delays.
In addition, the Democrats absolutely want the Republicans’ votes in the dispute over the debt ceiling, as the money will also be used to settle bills from the time of then US President Donald Trump. The Ministry of Finance has been taking “extraordinary measures” since the summer to prevent a payment default. So far, Republicans and Democrats have still agreed to raise the limit – albeit often after trembling and several rounds of negotiations.
McConnell, Republican minority leader in the Senate, had now offered not to block an emergency increase in the debt limit to a certain amount by December in a regular vote. At first, the White House reacted cautiously to the proposal, as it would only postpone the problem by a few weeks. A day later, however, the tone changed and they were open to McConnell’s suggestion. “This is a temporary reprieve, but we will not let up until Senator McConnell gives up his blockade and allows us to get this over with,” said White House Vice-Speaker Karine Jean-Pierre.
Finance Minister Yellen recently spoke out in favor of abolishing the law on the debt ceiling in its current form. “I think the debt ceiling is increasingly damaging to America,” she said again. It has led to a series of politically dangerous conflicts that have led Americans and global markets to wonder if the US was serious about paying its bills. In the US, Congress sets a debt ceiling at irregular intervals and determines how much money the state can borrow. The limit has been raised a dozen times since it was introduced in 1917, otherwise the money would have run out.
Behind the dispute over the bankruptcy, there is another battle of strength raging. Biden tries to save the two central projects of his presidency: a large package for investments in the country’s infrastructure and a second huge package for social investments. The Republicans definitely don’t want to be involved in the second project. However, there are also wing battles within Biden’s democrats – they cannot use their narrow majorities in Congress because of this.
