Wednesday, December 8th, 2021
Avoidance of payment default
US debt limit hike is imminent
For weeks, Democrats and Republicans in the US have been arguing about an impending government default. This could trigger a global financial crisis and an economic downturn. A further increase in the debt ceiling is now intended to remedy the situation.
A solution is in sight in the political dispute over an impending default by the US government. The House of Representatives, which is dominated by the Democrats, kicked off a parliamentary process with a vote on Tuesday evening (local time), at the end of which the Democrats in the Senate could decide to raise the debt ceiling with a simple majority – i.e. without the support of the Republicans, who are completely opposed to it.
The Republican minority leader in the US Senate, Mitch McConnell, said in Washington that he and the Democratic majority leader of the chamber, Chuck Schumer, had reached an agreement on the procedure. The Democrats should therefore raise the debt ceiling to a specific amount on their own, once and with a simple majority.
In a first formal step, at least 60 senators would have to clear the way for the procedure in the Senate, he said. McConnell said he was confident that enough votes would come from his party for it. Ten Republicans would have to go along. The actual increase in the debt ceiling would then have to be decided by the Democrats alone, said McConnell. In this simplified procedure, this would only require 51 votes in the Senate – exactly the wafer-thin majority that the Democrats have there. “I think this is in the country’s best interests to avoid a default,” said the Republican.
Payment default threatens in mid-December
A default in the world’s largest economy could trigger a global financial crisis and economic downturn. The Independent Budget Office of Congress (CBO) estimates that if Parliament does not raise the debt ceiling, the government is at risk of default before the end of the month. The Treasury Department recently warned that President Joe Biden’s government could run out of money by mid-December.
The political turmoil has been dragging on for a long time. The US Congress last approved an increase in the debt limit by 480 billion US dollars (just under 424 billion euros) in October in order to give President Joe Biden’s government financial leeway at least until the beginning of December.
With the debt hurdle cleared, Biden can begin his $ 1.75 trillion social and environmental package. Among other things, this provides for an expansion of childcare, care for the elderly and statutory health insurance, tax cuts for families and hundreds of billions of dollars for climate policy. Chuck Schumer reiterated his goal of delivering this political victory to Joe Biden “before the Christmas holidays”.