It’s that special time of year in America when faux chaos reigns.
Around this time, whenever there is a politically divided capitol, the nation’s debt ceiling drama begins. As predicted, the previous debt ceiling expired on January 19th and, true to form, a new one wasn’t agreed and lined up to create a sensible, seamless transition.
Why waste the opportunity for a good politically engineered crisis?
Scandal-embroiled President Joe Biden and newly-minted House Speaker Kevin McCarthy – who needed fourteen rounds of votes to finally persuade his own party colleagues to back him – are this year’s protagonists in what is America’s closest resemblance to pantomime.
The two politicians – a Democrat Commander in Chief and a Republican Speaker – met for the first time on Wednesday to discuss what possible solutions may exist to prevent the economic meltdown of the US Government.
And while we all know neither side is actually going to wilfully shut the Government down, there is a dance of fake outrage to go through first.
Republicans are demanding that if they are to approve the lifting of the borrowing cap then spending cuts must be part of the deal.
In response, the White House team have faked hot flashes and bewilderment at the idea of spending a bit less as they up the overdraft by a few hundred billion – Heaven forbid! – and have pointed the finger at the Speaker, calling on him to share his proposed budget with the President first.
Of course, this now becomes a game of ‘you show me yours and I’ll show you mine’.
The debt ceiling is the maximum amount federal government can borrow to finance the many obligations lawmakers have already approved. The U.S. debt ceiling currently stands at $31.4 trillion.
With a T.
Originally supposed to just make it easier for US Government to borrow a bit of cash now and again, the ceiling has quickly become the level at which the federal agencies need to borrow to keep functioning.
Hence the political football being kicked around.
If the government can’t continue to borrow ever more money, it won’t have the readies to pay its bills and obligations on time. Sound familiar?
It could stop sending Social Security cheques out, cease funding veteran benefit payments and tell federal workers from the military to museums not to expect to get paid anytime soon.
Shock horror! What a catastrophe! What would happen?
Well, of course, it sounds horrific, but no-one actually knows what would happen, because, well, it never actually has.
Both sides are playing Chicken-Licken and warning that the sky is about to fall in, when both sides and everyone watching knows it won’t.
If the U.S. Government defaults, the game is over. In 2011 the threat of a default spooked the financial markets so badly it caused the only credit rating downgrade in U.S. history.
While the politicians are shouting at each other and their attack dogs are roaming the TV studios and shock-jocks’ airwaves, quietly in the background the adults in the Treasury go to work.
They are taking ‘extraordinary measures’ like flogging the Post Office pension debt and Civil Service retirement funds and not re-investing the proceeds for 6 months, lowering the debt obligation and giving the politicians a little more wiggle room to come to a compromise agreement.
But will they this time?
As mentioned above, Speaker McCarthy had to go back time and time again to the Republican-controlled House of Representatives to get them to agree to his appointment – punishment for his support to investigate alleged malfeasance by former ‘Prez’, and darling of the unhinged-right, Trump.
Consequently, he may not be able to corral those who repeatedly opposed his election as they sense a default is a way to force the government to cut back spending on the poor, the unwell and the desperate.
For now, he is making the noises the hardliners want to hear, calling for reduced spending and to balance the US budget.
In the first round of shouty talks, McCarthy rejected Democrat calls for a debt ceiling increase without conditions.
The White House, in reply, refused to offer any concessions and reminded Speaker McCarthy of his “Constitutional obligation to prevent a national default.”
Meanwhile, why pour oil on troubled waters when you can double down on chaos.
That’s the House Republicans plan as they prepare to tell the Treasury Department which payments to prioritize, and by exclusion, which ones to sacrifice, if lawmakers don’t address the debt ceiling crisis in time.
In reply, the crazy-eyed Democrats are wailing about the meltdown of the nation’s supposed social fabric if more free money isn’t made available.
How, and when it will end, is unclear.
One thing is for certain though, it will end.
Even the most hairbrained politicians in America, and there are plenty to choose from in the current crop, aren’t going to crash the economy in such a blatant way, sending interest rates sky-rocketing, destroying home equity, and smashing the value of the dollar and hiking the price of commodities listed in the world’s reserve currency.
But the dance will go on for another few days or weeks.
My prediction – first, federal employees at national monuments and park services may be furloughed without pay but no-one much will care. Then, some 5-star retired general will warn the nation will be left undefended if the military aren’t paid promptly, and pictures of a smirking Putin and the Chinese Communist leadership will be flashed across our screens.
Suddenly the two parties will claim the higher ground and, in the interest of the nation, agree to lift the debt ceiling while continuing to work together on reducing Government excess.
Then, after a photo shoot together, they’ll all retire to the federally subsidized bar for a well-earned discount cocktail to celebrate saving the world.
God bless America.
