Republicans tried to limit US budget spending by law

The House of Representatives of the US Congress passed a Republican-initiated bill that allows an increase in the national debt ceiling in the next 10 years only along with budget cuts. It was difficult to drag him through – 217 congressmen voted “for” and 215 “against”, all Democrats and four Republicans. The plan, released earlier by Republican Majority Leader Kevin McCarthy, includes raising the national debt ceiling by another $1.5 trillion. In return for raising the ceiling to $32.9 trillion, Republicans are demanding cuts in government spending totaling $4.5 trillion over the course of a decade. In addition, the White House should limit annual spending growth to 1%. McCarthy’s idea is that if the administration wants to spend more than that, it will need congressional approval.

The bill has drawn sharp criticism from Democrats, who hold the majority in the Senate and control the White House. US President Joe Biden refused to negotiate with McCarthy and demanded that the national debt ceiling be raised automatically, as was done in the past. On April 26, White House press secretary Karine Jean-Pierre said, “President Biden will never force the middle class and working families to bear the brunt of tax cuts for the richest, as this bill does. The President has made it clear that this bill has no chance of becoming law.” Democratic Senator Chuck Schumer called the bill stillborn and warned that it only brings the US closer to default and jeopardizes funding for social programs.

On April 25, US Treasury Secretary Janet Yellen announced that a default on the national debt would lead the country to an economic and financial disaster. A default is theoretically possible if Congress blocks the possibility of increasing debt, which will create problems for its maintenance. Yellen urged Congress to raise the ceiling immediately or all US economic gains since the COVID-19 pandemic will be wiped out. “A default will increase the cost of borrowing indefinitely. Future investments will become significantly more expensive,” she stressed.

For the United States, the problem of public debt always remains one of the key, explains Lev Sokolshchik, a researcher at the Center for Comprehensive European and International Studies at the National Research University Higher School of Economics. The public debt debate has escalated significantly as the ceiling has been reached, and the level of polarization in American society is only growing. Today, the expert adds, the disagreements between Republicans and Democrats are so serious that they simply cannot agree on raising the ceiling, as they did more than once before. The situation is not improved by the imminent election campaign, for which both sides want to score political points, including demonstrating their position on the public debt. The current crisis is used by both parties in order to harm their opponent as much as possible. While prolonging the conflict harms the US, as long as political expediency prevails over common sense. According to Sokolshchik, the Republicans and Democrats will still agree on raising the ceiling, but their sharp conflict demonstrates how much the dysfunction of the US political system has worsened.

Nothing less than the outcome of the presidential election depends on the solution of the issue of public debt, said Vladimir Vasiliev, chief researcher at the Institute for the USA and Canada of the Russian Academy of Sciences. Democrats need to secure the financial ability to attract voters through social spending. In turn, the Republicans need to knock this ground out from under the feet of the Democrats, which will most positively affect the prospects of the Republican Party in the elections. The confrontation between the parties, continues Vasiliev, has taken on a very sharp character. Biden needs to get re-elected at any cost, and the Republicans need to win, because otherwise voters will think that another era of Democratic power has come. This explains the uncompromising position of both parties on the issue of public debt, which boils down to the “all or nothing” thesis. A compromise between them is still likely, but given that now the conflict is going according to the “who will falter first” scenario, it is difficult to believe in the possibility of parties to agree, the expert sums up.