MAGA Republicans in Congress are holding raising the debt ceiling hostage unless their demands are met and will not consider passing a seperate bill that would involve budget cuts.
Republican lawmakers on Wednesday unveiled their plan to raise the debt ceiling and cut government spending ahead of the looming summer deadline to avert a catastrophic and historic default by the U.S. on its debt obligations
To understand the potential consequences of a U.S. default, it is important to understand what the debt ceiling is and how it works. The debt ceiling is a limit on the amount of money that the U.S. government can borrow to fund its operations. This limit is set by Congress and is designed to prevent the government from spending more money than it takes in. If the debt ceiling is reached, the government cannot borrow any more money, and it is forced to rely on its existing revenues to pay for its expenses. If the debt ceiling is not lifted and the U.S. defaults on its bills, the consequences could be disastrous, both for the U.S. and for the global economy. Not raising the debt ceiling is like maxing out your credit card and then not pay the bill.
House Speaker Kevin McCarthy and the MAGA Republicans have put forward their demands in order to raise the debt ceiling in the bill called the “Limit, Save, Grow, Act” that would lift the ceiling by 1.5 trillion dollars or by the end of March 2024.
The GOP bill limits increases in the federal budget to 1% per year, significantly slower than the rate of inflation and less than recent year-over-year budget increases, particularly since the pandemic.
The Republican plan would nix $80 million in additional IRS funding, including funding for thousands more agents, that was made possible by the Inflation Reduction Act. Republicans passed a bill to eliminate those additional positions before, but the bill died in the Senate, according to ABC News.
The GOP bill imposes stricter work requirements to receive Supplemental Nutrition Assistance Program (SNAP) funding, formerly known as food stamps, for childless adults. The bill also requires each state to collect and submit information to the federal government about the percentage of people enrolled in SNAP who are in unsubsidized employment, as well as the median earning of people who were work-eligible after they leave the program.
The Republicans’ bill would nullify Mr. Biden’s program forgiving student loan debt up to $20,000 per borrower. Under the plan, announced by the president last August, eligible borrowers can have up to $10,000 in student debt wiped clean, while qualifying Pell Grant recipients can have an additional $10,000 forgiven. The program has been on hold as legal challenges have made their way through the courts. Roughly 40 million Americans are eligible for the relief. President Biden extended a pause on federal student loan payments, first put in place by Trump in the early months of the pandemic, through June, according to ABC News.
Republicans now want to rescind key aspects of the Inflation Reduction Act that was signed into law that were designed to combat climate change, including provisions establishing a high-efficiency electric home rebate program and home energy efficiency contractor training grants.
If the debt ceiling is not lifted, the U.S. government will be unable to pay its bills, including interest payments on its debt. This could lead to a default on U.S. debt, which would have significant consequences for the U.S. and global economy.
The financial market would be in turmoil. The U.S. is the largest economy in the world and has the largest financial market. If the U.S. defaults on its debt, it will trigger a massive sell-off in the global financial markets. Investors would be spooked, and they would likely dump their U.S. assets, including U.S. Treasury bonds. This would lead to a sharp increase in interest rates, as investors demand a higher return on their investments to compensate for the increased risk. The stock market would likely crash, and investors would suffer huge losses.
Included in the debt limit package is H.R. 1, the “Lower Energy Costs Act.” The legislation aims to boost American energy production and decrease dependency on foreign oil. The plan seeks to quicken the permitting process for energy and infrastructure projects and increase oil and gas production and sales. It also includes a provision that prohibits the energy secretary from implementing any rules that would “directly or indirectly limit” consumer access to gas kitchen ranges and ovens, according to ABC News.
If the U.S. defaults on its debt, it will likely result in a downgrade of the U.S. credit rating. This would make it more expensive for the government to borrow money in the future, as investors would demand a higher return on their investments to compensate for the increased risk. The downgrade would also have ripple effects throughout the global economy, as other countries and companies that rely on U.S. debt as a benchmark would also see their credit ratings downgraded.
If the debt ceiling is not lifted, the U.S. government would be forced to shut down non-essential services, furlough employees, and suspend payments to contractors and suppliers. This would have a significant impact on the U.S. economy, as businesses and individuals that rely on government services and payments would be affected. For example, Social Security recipients would not receive their checks, and government contractors would not be paid, leading to a ripple effect throughout the economy.
If the U.S. defaults on its debt, it will become more expensive for the government to borrow money in the future. This would have a significant impact on the U.S. economy, as higher borrowing costs would mean that the government would have to pay more to service its debt. This could lead to higher taxes or cuts in government services, which would have a negative impact on economic growth and job creation.
There would be international repercussions. The U.S. is the world’s largest economy and is closely tied to the global economy. If the U.S. defaults on its debt, it will have significant international repercussions. Other countries that hold U.S. debt would suffer losses, and the value of their holdings would decrease. This could lead to a global financial crisis, as investors around the world would suffer losses and become more risk averse. The resulting economic downturn could lead to job losses and reduced economic growth around the world.
There will be political fallout. If the debt ceiling is not lifted, it could have significant political consequences for the U.S. The political fallout of a U.S. default would be severe and could result in a loss of confidence in the government and its ability to manage the country’s finances. The government would likely face a backlash from the public, as well as from other countries and international organizations. This could lead to increased political instability, as the government struggles to regain credibility and regain the trust of its citizens.
Moreover, the failure to raise the debt ceiling could create a constitutional crisis. The government may have to choose which bills to pay and which ones to defer, as it would be impossible to pay all the bills at once. This could lead to a legal battle over the government’s obligations and could ultimately result in a Supreme Court ruling. .
During the Trump administration, the U.S. national debt increased by over $7 trillion, reaching a total of $27.8 trillion by the end of the administration in January 2021.
The Trump administration implemented a tax cut in 2017, which reduced tax rates for individuals and corporations. The tax cut was estimated to increase the national debt by $1.5 trillion over the next ten years, according to the non-partisan Congressional Budget Office. The Trump administration argued that the tax cut would stimulate economic growth and create jobs, but critics argued that it would primarily benefit the wealthy and increase income inequality.
In addition to the tax cut, the Trump administration increased government spending, particularly on defense and infrastructure. The administration argued that the increased spending was necessary to improve national security and modernize infrastructure, but critics argued that it would increase the national debt and be unsustainable in the long term.
The consequences of a U.S. default would be severe and far-reaching, both for the U.S. and for the global economy. It would trigger financial market turmoil, result in a credit rating downgrade, lead to a government shutdown, increase borrowing costs, have international repercussions, and result in political fallout. A U.S. default would also have a long-term impact on the U.S. economy, as investors would lose confidence in the government’s ability to manage its finances, leading to reduced investment and economic growth. Therefore, it is imperative that the U.S. government raises the debt ceiling and avoids a default, as failure to do so could have devastating consequences for the U.S. and the world.
This is MAGA Republicans way of “owning the libs!” They will let the American and global economy tank if their demands are not met because they know it would look bad for Biden. I wish they would grow up and act like responsible adults.
