Washington. The U.S. governance crisis tends to unfold in the final days of the U.S. fiscal year, which ends in September; or when the federal government’s debts meet the congressional debt ceiling.
This week the US is reaching these two destinations almost simultaneously: the end of the year and the end of the ceiling.
At midnight on Thursday (7 a.m. in Israel, Friday), parts of the U.S. government will begin to close, unless a last.minute formula is found that will continue to fund them. ) Will be closed, and their employees will stop working and receive a salary.
By itself, there is nothing new in that. In the last 35 years such crises have recurred. Parts of the government were shut down, sometimes for several weeks.
But what has never happened in U.S. history has been the insolvency of government debt. Such an event would move the U.S. into a new category, alongside Argentina, Venezuela, Lebanon and Zambia. Since the US is a little more important than the above, the global financial system will hold its breath.
This is the result of three things: the Democrats’ unprecedented appetite for trillions of high.cost economic and social initiatives; Republican determination to thwart most of these initiatives; And a tiny Democratic majority in Congress, hanging on a brake.
In the Senate, this majority requires the intervention of the Vice President (who is also the President of the Senate), to decide a 50.50 draw. But even the 50s are not in the pockets of the Democrats. At least two of their friends disapprove of the initiative.
At stake now is a $ 3.5 trillion budget proposal, which both parties recognize in its revolutionary nature. It has the potential to change economic and political order with a historic degree of government intervention in economic activity. For Democrats, the intervention is “progressive,” and for Republicans it is “socialist.”
Political needs set the tone
The Senate is a complicated body, operating on the basis of twisted and archaic parliamentary rules. Legislation in the Senate requires a privileged majority (at least 60 out of 100), although the majority party may circumvent this hurdle in allocation laws. At its disposal is a mechanism known as “reconciliation”, which requires much more time and much more political pain.
Indeed, it is political and electoral needs that set the tone. Soon the United States will enter a mid.term election year in which all House seats and about a third of the Senate seats are up for election, and the two parties are trying to score points, at each other’s expense.
Republicans are willing to extend government funding through a process known as “continuity.” But they are unwilling to lend a hand in raising the debt ceiling. They say that Democrats can suspend it without help, through the “reconciliation” process. Democrats grit their teeth, noting that in the past they voted to raise the ceiling under Republican presidents, even when their priorities did not please them. There is currently no sign that Republicans will be flexible about the ceiling.
Finance Minister Janet Yellen warned in a letter to House Speaker Nancy Pelosi today (Tuesday) that the United States will have difficulty repaying its debts after October 18. The government may be forced to stop paying Social Security to 50 million pensions, and to suspend child grants to 30 A million families.
Wall Street always finds over.activity in September.October, regardless of the crises in Washington. Closing the government and defaulting are exactly the spices they do not need.