Treasury Secretary Janet Yellen announced that her department had begun using extraordinary cash management measures to prevent a credit default until June 5th, but the clock is ticking. If Congress fails to increase the debt ceiling by the time the Treasury runs out of cash, then the US government could default on its loans for the first time in history, Ian Bremmer explains. Not only would this shake investor confidence in US bonds, raising the prospect of an American recession, but because US debt is the cornerstone of the world economy, it could also spark a global financial calamity.
So, what’s the holdup? Politics, of course. Republican House Speaker Kevin McCarthy, who handed the hard-right delegation of his party everything short of a kidney to secure his leadership role, is signaling that the only way Republicans will agree to increase the debt ceiling is if President Biden works with them on spending cuts in the federal budget—a budget that has grown nearly 30% over the last three years.
“I don’t know anyone who agrees with the President that we should just raise the debt limit and have no negotiations. That they believe there’s no area in government where we can eliminate waste.”
McCarthy’s senior-most ally in the Senate, Minority leader Mitch McConnell, has plenty of experience mudwrestling over the debt limit during the Obama years (apologies for that mental image). But interestingly, he’s not touching this latest squabble with a ten-foot pollster.
President Biden, for his part, has made clear that he’s not going to, as he puts it, let a far-right Republican House hold the American economy hostage. But it’s clear that the fight over the debt ceiling is just the first of many bitter government standoffs to come, given McCarthy’s razor-thin majority in the House and the Democrats’ control of the Senate and White House. What happens, you ask, when Congress must tackle crises far more urgent and unexpected than a long-awaited debt-ceiling increase? And what can the more moderate Republican members of Congress do to rein in their hard-right colleagues?
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