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Debt limit fight in Washington: will the U.S. default on June 1?

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It’s déjà vu all over again.  Today Treasury Secretary Janet Yellen warned the United States will be unable to pay its bills on June 1 – unless the debt limit is raised.  Now.

It feels like the Washington summer of 2011. Debt limit politics were hurtling Congress and the White House towards a default for the first time in its history. On August 5 of that summer, Standard & Poor’s, surveying a battlefield of stalemate and brinkmanship, lowered the credit rating of the United States.  It cost US taxpayers tens of billions of dollars in higher interest rate payments. S&P said:

“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge.” 

That was then.

American policymaking and political institutions are significantly weaker today.

The debt limit – the number of dollars the overall national debt can reach – is set by Congress by statute.

The amount of debt reflects the money Congress has voted to spend and the tax revenues that are collected.  

In Washington, when Congress refuses to increase the debt limit, it means Congress is refusing to pay for the expenditures it has required the government to spend.  Raising the debt limit means authorising a higher level of national debt to cover spending that has already happened.

The debt limit is like your credit card:  each month, you have to pay back the money you have spent – or you go into default.  

The politics of the debt limit are invidious.  For three decades, Republicans have played “gotcha”: with the debt limit – especially when Democratic presidents are in the White House. 

Why play “gotcha”? To go after those wild-spending, reckless radical Democrats with their out-of-control programs that add to the deficit and bankrupts the country. To get an edge in the next election for control of the House and the Senate.

It does not matter that the currency of debt-limit-gotcha politics is counterfeit – nothing to lose in making the attack.

In 2011, the Republicans demanded, with the debt limit approaching $14.3 trillion, President Obama accept $2 trillion in spending cuts – cuts that would reach deep into Medicare and a host of other domestic programs – in exchange for $800 billion in new revenues.  

It was a searing confrontation.  On August 1, Vice President Joe Biden met with the House Democrats to discuss what was an unholy mess. (I was in the room, and this is recounted in my book with Bryan Marshall, The Committee).  That day, Biden said:

“The whole debate and debacle is not about the debt limit or the deficit. It’s about fundamentally altering how government functions. They are using the deficit they created to decimate the social structure of this country. You [the Democrats in Congress] have educated us all to how far out these guys are.  There are 100 in the House and 10 in the Senate who would take this country over the cliff.”

Those “far out guy” numbers among the Republicans in this Congress have doubled.

Last week, with Joe Biden as president, House Republicans voted to raise the debt limit – provided Biden accept their cuts of $4.8 trillion in everything from health care to education to child nutrition to clean energy, and much more.

Joe Biden remembers all the lessons from the closest of calls with default 12 years ago. Those “far out guys” are now the Trump MAGA Republicans with their slash-and-burn agenda and priorities. Biden hated being muscled by them then and he has no intention of surrendering to them now and allowing them to “decimate the social structure” of the United States.

Biden also knows what the Republicans did when Trump was president. Those same Republicans increased the debt limit 3 times, by $7.8 trillion – with no government spending cuts and huge tax cuts that primarily benefited the wealthiest Americans.

Biden is asking the Republicans simply to do what they did for Trump 3 times. They have refused. They were not shocked by the Trump deficits, but the Biden deficits are a catastrophe.

Biden is done playing this game. 

This is why he says he is happy to discuss government taxes and spending until the cows come home – but that raising the debt limit is “not negotiable.”

The current debt limit impasse is more dangerous than the 2011 crisis, for three reasons:

  • Republican Speaker McCarthy has told colleagues that the spending cuts passed by the House – by a 1-vote margin – was not a “ceiling” but a “floor” on spending cuts.  In other words, he has no intention of retreating from those cuts. He cannot give them up. As Senate Majority Leader Chuck Schumer has said:

“He’s (McCarthy) stuck. How is he going to negotiate when he’s promised everyone he’s not going to change the bill? … His passing a bill was a step backward and brought us closer to default.”

  • A default by the United States is likely to plunge the economy into a recession that will last well into next year.  While Republicans will get the blame for starting it, President Biden will get the blame for not ending it – just as he faces the voters for re-election in 2024.
  • There are no guardrails on how radical the Republican mood is. As Norman Ornstein, a leading US political scientist, advised last week:

“Far more than in 2011, a hard core of hard-core extremists in the House would be fine with a default. For many, blowing up government would make the price of economic chaos worth it; for others, the likelihood that a default would be blamed more on the president makes it a tempting ploy.”

President Biden is not going to dismantle his legislative achievements to capitulate to Republican demands to cut spending and cripple his presidency when they rewarded Donald Trump’s uncontrolled fiscal binges.

This crisis is much harder.   Democrats will not give in to the Republicans taking the debt limit hostage and using it to harm the livelihoods of tens of millions of Americans. In the House, McCarthy dare not cut a deal with Biden that fails to get a majority of his caucus to support it. And even if he does reach a deal with Biden, the Republicans in his caucus may well move to oust him.  In the Senate, any deal with Biden has to get the support of no less than 10 Republican votes. Those votes do not exist today.

The alchemy to solve this problem – substantively or procedurally – has not been invented yet.

This calculus means that default is more likely now than at any time in American history.  More likely now than when Biden faced this crisis and spoke to the Democrats 12 years ago.  

Bruce Wolpe is a Ticker News US political contributor. He’s a Senior Fellow at the US Studies Centre and has worked with Democrats in Congress during President Barack Obama's first term, and on the staff of Prime Minister Julia Gillard. He has also served as the former PM's chief of staff.

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Are audiences already fed up with AI?

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One of the standout moments from the recently concluded SXSW in Austin, Texas, was the crowd’s reaction during the film premiere of “The Fall Guy,” featuring Ryan Gosling.

Attendees voiced their displeasure with an AI video sizzle reel, which failed to resonate with the everyday consumer, resulting in boos from the audience.

The incident underscores the growing importance of understanding and catering to the human experience in technology and entertainment.

 

 

 

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A surge of Hollywood actors dive headfirst into Gaming

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Exciting news has emerged from the gaming world as a beloved video game franchise gears up for a television adaptation.

The official Among Us account recently revealed that an animated TV series is in development, featuring stars such as Ashley Johnson, Elijah Wood, Randall Park, and Yvette Nicole Brown, courtesy of CBS Studios.

Meanwhile, Summer Game Fest 2024 has announced its return, promising a showcase of new video game announcements, trailers, and first looks on June 7th, hosted by Geoff Keighley.

Anticipation mounts for potential reveals from industry giants like Rockstar Games, Kojima Productions, Insomniac Games, and Santa Monica Studios.

Getting Pro with Playstation

In other news, rumours surrounding the PlayStation 5 Pro have gained traction following leaks reported by Insider Gaming. According to leaked documentation, the PS5 Pro boasts enhancements including 45% faster rendering, 2-3 times the ray-tracing capability, and a custom machine learning architecture, potentially slated for a holiday 2024 release.

However, Insider Gaming notes that plans may be subject to change based on Sony’s release strategy for first-party titles.

Games out this week

As the gaming community eagerly awaits these developments, this week also sees the release of notable titles such as “Princess Peach Showtime!” on Nintendo Switch, “Rise of the Ronin” on PlayStation 5, and “Dragon’s Dogma II” on Xbox Series, PC, and PS5, promising diverse experiences for players worldwide.

 

 

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United Airlines’ congestion – can the CEO be trusted?

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United Airlines CEO Scott Kirby has reassured passengers following a series of incidents involving the carrier’s aircraft.

Amid growing safety concerns, CEO Kirby has stated that thorough investigations are underway to determine the root causes of the incidents and to implement necessary changes to prevent similar occurrences in the future.

The questions remains, will the public’s trust in the airline be restored and how effective are United’s safety protocols and training programs? #TICKER TODAY #featured

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