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29 Sep, 2021 13:20

America won’t default on its huge $29 TRILLION debt, but it is heading for another theatre of the absurd over government spending

Tom Fowdy
Tom Fowdy

is a British writer and analyst of politics and international relations with a primary focus on East Asia.

is a British writer and analyst of politics and international relations with a primary focus on East Asia.

America won’t default on its huge $29 TRILLION debt, but it is heading for another theatre of the absurd over government spending

Joe Biden’s profligate budget is heading for a showdown in Congress, where Republicans plan to hijack it. There’s going to be a lot of hot air, posturing, and dramatics – but not much to tackle the US’ underlying fiscal problem.

The United States is heading towards its congressionally set ceiling on the level of national debt it is allowed to accumulate. As you can imagine, the Covid-19 pandemic, several mega stimulus and spending bills (with yet more to come), as well as ever-bulging military expenditure has sent America's budget deficit and national debt to eye-watering new heights, the former amounting to an astronomical $29 trillion. 

The US Constitution vests Congress with the power of setting the national budget, and as it happens spending will soon reach that self-imposed ‘ceiling’ on October 16. 

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If Congress fails to agree on raising the budget by this date, then subsequently the US enters default on its own debt and faces a government shutdown. Raising the ceiling might be easy to get through Nancy Pelosi's Democrat-dominated House of Representatives, but not in the near 50-50 split Senate, where Republicans are blocking an elevation of the ceiling in opposition to Biden's spending plans, due to a previously agreed legal requirement for 60 votes in order for it to pass . This has made the international markets nervous.

The United States will not default on its own debt – that would be unthinkable – and in the end an agreement will be reached, most likely at the last moment. However, the Republicans are about to create an intense congressional showdown in order to politically leverage this bubbling crisis, to try to inflict humiliation on the Biden government and force concessions on it. 

Such behaviour is typical of the increasingly polarized nature of American politics and is endemic of the highly dramatized game of ‘congressional haggling’ which has been seen time and time again in recent years. It will be utilized to pursue maximum political damage on Biden, who has been using his slim majority in both houses to push through his highly ambitious economic agenda, but this might see it come a cropper. 

The Congress of the United States is a theatre. It is a forum where politicians in an already highly theatrical and hysterical culture maximize posturing for their own career gain. It is an attitude that has only been amplified within the near-toxic political divides which have crystallized in recent years, and the biggest and most convenient battleground has always been matters regarding national budgets. Money talks, especially here. 

With Congress vested with the power of the purse and the president not, the executive branch has always had to rely on the goodwill and persuasion of the legislature to meet the White House’s spending visions. This is easy when the president’s party controls Congress, but when they do not it has consistently become an opportunity for the opposing party to create drama and inflict humiliation on a president they oppose by blocking his spending plans. 

In 2018-2019, Pelosi sought to stymie Donald Trump by refusing to cooperate on funding for his border wall project, creating the longest 35-day shutdown in history which lasted from December to January. Obama found himself in similar situations against Republicans. 

Now the Biden administration is in office and pursuing a scheme of radical spending. The Republicans see such ‘big government’ as nauseating and have a particular distaste for his environmental plans, which they term a ‘green new deal’. In a repeat of similar Obama-era drama, they want to force budget cuts on the president and hobble his programs, and never has there been a better opportunity to do this than the looming US debt ceiling deadline. 

Both sides know, privately, that the spending ceiling has to be raised eventually, or it will otherwise be the equivalent of igniting a nuclear bomb on the US economy. But Republicans are determined not to give Biden a pass for excessive spending as he pleases. Given the ugly scenes of the Trump administration, they're also out for political revenge. 

They want to discredit the president, skewer him, and give themselves the initiative – something they have largely failed to do despite Biden's faltering first nine months and the crisis in Afghanistan. What, then, could be a better opportunity than to refuse to cooperate over the US debt ceiling? If Biden wants their help, he needs to make concessions. 

The Democrats could try to narrowly vote to change the rules and bypass the 60-vote tally in the Senate to raise the borrowing authority on their own. However, this is also a political minefield which will break the bipartisan nature of the initiative and give ammunition to Republicans to attack them with the midterm elections looming next year. Therefore, the preferential path is that both sides cooperate, but it will only be achieved at a steep political cost.

As a result, expect a showdown and drama and a lot of hot air to come out from all this, but not a default. The United States Federal Reserve will continue to print trillions of dollars and to flood the world with them in order to foot the government’s spending, all the while getting China to buy their US Treasuries. China already owns an estimated $1.1 trillion of them, a source of concern for the many Sinophobes in US politics. 

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One wonders in the long term just how sustainable these financial practices are, as American debt climbs ever higher and higher, fuelled by both parties’ recklessness. While Republicans don't like ‘big government’ in terms of environmental programs, healthcare, education, and so forth, they do love ‘big military’ and are not truly anti-’big debt’ in that sense. 

But this is shaping up to be the first major congressional struggle of Biden's presidency, and if the Republicans do manage to slam him over this, they will hope to to come roaring back in the midterms, especially using fears over higher taxes to pay for all this profligacy.

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The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

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