US bumps up against debt ceiling again
The US is heading for “the messiest fight” in a decade over America’s legislative debt limt, says Alan Rappeport in The New York Times. Technically, the US government has already breached that limit, which caps the amount of money the federal government can borrow to pay its bills, including those for programmes already authorised by Congress. It has been using “accounting manoeuvres” to get around this, but the space for these “could be exhausted by June”. Then the US would be forced to default on its debt, which could be “economically devastating” and “plunge the world into a financial crisis”.
This has become a “perennial issue”, says Lauren Fedor and Colby Smith in the Financial Times. This time, however, the protracted nature of the standoff between Republicans, who control the House of Representatives, and the Democrats, who control the White House and Senate, has raised tensions. Already the Biden administration has been forced to shift from its demand that Republicans lift the limit without condition to seeking to negotiate a compromise.
One idea being pushed by a bipartisan group of Democrat and Republican moderates is to allow the limit to be suspended in return for establishing a “deficit-reduction commission” and budget controls, says Steven Dennis on Bloomberg. It remains unclear whether the Biden administration, or the Republican house speaker Kevin McCarthy, would accept such a deal, not least because the latter “owes his job to Republican hard-liners who insist on trillions in spending cuts”. So far, Democrats “aren’t talking up” a remaining option: “executive action to bypass the debt limit”.