News from the Financial Associated Press, January 30 (edited by Ma Lan)The big ship of the US federal government is sailing in high-risk waters. If you are not careful, it may hit an iceberg and cause a devastating disaster. And the biggest iceberg of all is the debt ceiling impasse.
U.S. Treasury Secretary Yellen recently warned that if the federal debt ceiling cannot be resolved smoothly, the U.S. will face a catastrophic debt crisis and a spiral economic recession.
On Sunday, House Republican Speaker McCarthy said he would meet with U.S. President Joe Biden at the White House on Wednesday to discuss the debt ceiling and the prospect of a U.S. default. However, many analysts doubt whether this face-to-face meeting between the Democratic president and the Republican speaker can really solve the problem.
The hard-liners among Republican lawmakers insisted that they would not raise the federal debt ceiling unless the Democrats agreed to additional spending cuts; while the White House said raising the debt ceiling was non-negotiable and would not agree to cut spending.
Both parties are waiting for the other party to change their positions. However, as the time for default approaches, a “prisoner’s dilemma” is quietly unfolding.
The options before the Democrats are nothing more than two: cut spending or not cut spending, while the options before the Republicans are to raise the ceiling or not raise the ceiling. The best outcome for the Republicans is cut spending and higher caps, and the best outcome for Democrats is no spending cuts and higher caps.
However, the fascinating thing about the prisoner’s dilemma is that the outcome of events often goes to the worst end: Democrats do not agree to cut spending, while Republicans do not agree to raise the debt ceiling, triggering debt defaults.
In this case, the US medical insurance hospital fund will be the first to go bankrupt in 2028, and the US social security trust fund will be insolvent before 2035.
According to a White House spokesman on Sunday, Biden will ask McCarthy on Wednesday whether he will also fulfill his constitutional duty to prevent the United States from defaulting on the country, as past congressional leaders have done.
McCarthy said on Sunday that Republicans would not allow the U.S. to default on its contract and that cuts to Social Security and Medicare spending would be excluded from any debt-ceiling talks.
However, McCarthy also added that he wanted to “strengthen” the increasingly expensive retirement and national health benefits for older people. The White House pointed out that the so-called “strengthening” is just a euphemism for cuts.
According to White House spokesman Andrew Bates, Republicans have used code words such as “strengthen” for years to cut benefits that the government has fought for, such as proposals to privatize Medicare and Social Security and raise the retirement age. And McCarthy’s promise to strengthen the management of these programs will lead to spending cuts and affect the welfare of the people.
However, the Republican side accused the Democratic Party of being too “generous” in the past two years of legislation on infrastructure, chips and green energy, which posed a great threat to US finances.
McCarthy also emphasized that the government should not just print more money, but should balance the budget. He hopes to find a more efficient and responsible budget usage model in various departments, such as more reasonable allocation of defense spending.
So far, the Republican Party has not provided specific details of budget cuts, which has also led many people to speculate that this effort by the Republican Party is unusual. They believe that, apart from the 2011 vote, there has been a tacit understanding between the two parties over the past few decades about raising the debt ceiling, and this attack is somewhat abrupt.
In addition, the meeting between McCarthy and Biden on Wednesday was accompanied by a wave of investigations of Biden by Republicans in the House of Representatives. The atmosphere of partisanship is so strong, which makes analysts even more worried.