As of: 09/29/2021 3:15 a.m.
In the United States, the deadline for averting a partial standstill in government business is running out. If no agreement is reached by Thursday, federal employees would be sent on compulsory leave and authorities would have to close.
If the political position war between Democrats and Republicans in Congress continues like this, then all authorities will have to close again on Friday, officials staying at home without a salary. This time, however, the speechlessness across the corridor is so massive that the United States is insolvent and defaults for the first time in its history, said Treasury Secretary Janett Yellen in a Senate hearing.
US Treasury Secretary Janett Yellen warns of the drastic consequences of a possible shutdown.
Image: AFP
The time could come from October 18th. And because there is no experience for this situation, the minister paints a catastrophic scenario: “Confidence in the creditworthiness of the USA would suffer and our country would face a financial crisis and a recession as a result.” And it warns of a collapse of the stock markets.
The background: The US debt ceiling is capped by a law. So much money is currently being borrowed that this limit is reached. This is not new, the limit has been raised a dozen times in history, mostly with votes from both parties. The Democrats last took part when Donald Trump needed money for the Corona economic stimulus package.
But we’re not doing it, says Republican Senator Pat Toomey, the Democrats want to waste money: “The Democrats are in a spending frenzy and want to expand that too. And if they prevail, we will borrow even more than we would otherwise have to.”
Resistance from both parties
In fact, President Joe Biden has two trillion dollar programs in Congress: one for infrastructure and one for social programs. In the one for more social benefits, he does not have all the Democrats in the Senate on board. Without this package, however, the left wing of the Democrats in the House of Representatives does not want to agree to any money for infrastructure.
In this mixed situation, many use the debt ceiling as a further means of political pressure. Technically, Biden can still bypass the Republicans if he gets all the Democrats on board. Nevertheless, it will take several weeks and it will be scarce. Then what Yellen predicts could happen: “50 million pensioners will not get a pension, our troops would not know when their wages will come.”
But the aid for hurricane victims or the corona aid would also end immediately. “Exploding interest rates make mortgages just as expensive as repayments for loans or credit cards,” threatens Yellen.
Both sides accuse each other of irresponsibility, both pointing a finger at the other to pin the blame for an actual crisis on the other party. While there is still time for a solution, investors worry that the US will end up slipping into a massive financial crisis due to political stubbornness.