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US debt crisis a pawn in bipartisan dispute

Source:CHINA DAILY/XINHUA 2023-06-05

A view shows the Capitol Building in Washington, DC, on Jan 20. LIU JIE/XINHUA

NEW YORK — After weeks of passing blame and playing a game of chicken, the Republicans and the US White House have reached an agreement to raise the debt ceiling, which has been approved by the Congress. The move has at least averted economic catastrophe — for now.

Even so, the brinkmanship that both parties have been accustomed to has turned the debt ceiling issue into a "time bomb" that threatens the US and the global economy, while the deep-rooted debt issue remains unresolved, which has the mainstream media and experts from around the world worried.

Political football

The debt ceiling, which is the maximum amount of debt set by the US Congress for the federal government to fulfill payment obligations, has historically been a routine matter, often requiring bipartisan support to raise it. However, it has turned into a game of political football in recent decades, with lawmakers from both parties using the debt ceiling as leverage to advance their political agendas.

Despite reaching the $31.4 trillion debt limit in January, discussions between the White House and Congressional leaders only began on May 9, less than a month before the estimated date of default on US debt obligations.

The deal reached between the White House and House Republicans offers a temporary respite but fails to address the deeper issue of the US debt default crisis becoming a tool of US political struggle.

Republicans are poised to deliver a big, consequential change in Washington by halting Democrats' reckless spending, taking back unspent COVID-19 funds, and blocking Biden's new tax schemes, said Speaker of the US House of Representatives Kevin McCarthy on May 27.

It is being widely reported that the deal would suspend the debt limit until January 2025, allowing the upcoming presidential election not to be troubled by the debt ceiling issue.

Unsustainable debt

For the US government, hitting the legislative debt ceiling is nothing new. Yet the debt-addicted government has managed to stay under the debt ceiling for years, not by reducing its debt but by raising the ceiling.

Before the onset of the debt crisis this time, the US debt ceiling had been modified 102 times since World War II, according to the US Congressional Research Service. Since 2001, there have been 20 adjustments, often accompanied by bitter political strife, market turmoil and government shutdowns.

According to data from the US Treasury Department, the current federal debt of the country is about $31.46 trillion, or $94,000 for every US citizen.

Good news from the approved deal for the US debt ceiling impasse may quickly turn to be bad news for financial markets, Reuters said on May 28, explaining that once a deal is reached, the US Treasury is expected to quickly refill its empty coffers with bond issuances, sucking hundreds of billions of dollars of cash from the market.

"Our concern is that if liquidity starts leaving the system, for whatever reason, this creates an environment where markets are crash-prone," Alex Lennard, investment director at global asset manager Ruffer, was quoted as saying by Reuters.

"The ... chaotic negotiations between Democratic President Joe Biden and the Republican majority leader in the House of Representatives show that the US does not have respect and commitment to the global financial institutions that are suffering due to their unscrupulous and circus-like back-and-forth negotiations," said Joseph Matthews, a senior professor at BELTEI International University in Cambodia.

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