2023-06-02 03:24:39
An impending insolvency of the US government has been averted. After the House of Representatives, the Senate in Washington also approved a bill late on Thursday evening (local time), with which the national debt ceiling in the USA will be suspended for the time being. Without the move, the US government would have run out of money in a matter of days. To the very end, President Joe Biden’s Democrats had fought bitterly with the Republicans to find a compromise.
With the final vote in Congress, a long political nail-biter, which had triggered great concerns regarding an economic crisis in the USA and beyond, ended. A default by the world’s largest economy might have triggered a global financial crisis and economic downturn. The political impasse in Washington had therefore also caused unrest on the stock exchanges.
63 out of 100 senators voted in favor of the bill, which would suspend the debt ceiling until 2025 while curbing government spending over the next two years. The necessary majority in the Congress Chamber was thus achieved. This ensures that the government does not become insolvent in a few days. US Treasury Secretary Janet Yellen recently warned that this dramatic event might occur on Monday. The solution therefore only came regarding shortly before the deadline.
The US House of Representatives passed the bill on Wednesday evening. After the final vote in the Senate, President Biden now has to sign the law in order to put it into effect. However, this is considered a mere formality.
The background to the debt drama: In the USA, parliament sets a debt ceiling at irregular intervals and thus determines how much money the state can borrow. This time the procedure degenerated into bitter party-political wrangling and ideological trench warfare between Democrats and Republicans.
The Republicans, who have had a majority in the House of Representatives since January, refused to raise the debt ceiling for many weeks and demanded significant cuts in government spending. They argued that government spending had spiraled out of control and reached irresponsible levels. The Democrats, in turn, accused the Republicans of risking an economic disaster for the country just to make a name for themselves politically.
Biden and the Republican chairman of the House of Representatives, Kevin McCarthy, had struggled in tough negotiations over the past few weeks to reach a cross-party compromise and only presented a deal last weekend. The compromise provides that the size of the federal budget, which the Democrats wanted to increase under Biden, is effectively frozen. The budgets of many federal agencies and ministries are being adjusted for this. The Republicans were also able to enforce that recipients of certain social benefits must prove a job. The Democrats actually wanted to increase state revenues by taxing the rich more heavily. On the other hand, the Republicans braced themselves.
Many Democrats and Republicans alike are dissatisfied with the deal. Left-wing democrats complain regarding cuts in the social sector. For right-wing Republicans, the cuts don’t go far enough. And many moderate politicians from the middle of both parties are not at all enthusiastic. In view of the looming dramatic consequences of a default, however, sufficient members of Congress from both camps voted in favor of the deal and thus secured the necessary majority in Parliament.
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