The largest economy in the world is nearing bankruptcy despite recent pledges of millions in aid far and wide. Can America afford all of this while bandaging their own financial wounds?
Hours before the end of the September 30 deadline, President Biden signed H.R.5305, a short-term funding law temporarily extending government and federal agencies’ spending capabilities. Hence, briefly avoiding a government shutdown. It was backed by the U.S. House of Representatives (HOR) in a 220 – 211 vote on Wednesday, and eventually the Senate at 65 – 35 hours before being sent to the president.
This comes after U.S Secretary of the Treasury and economist Janet Yellen appeared before the Senate Banking, Housing and Urban Affairs Committee. On Tuesday, she discussed alternative financing options for the government, including the increase of its borrowing authority to prevent a shutdown. If not, the Biden Administration appointee forecasted the government running out of money by October 18.
According to Yellen, “[The U.S. government shutdown] would be disastrous for the American economy, for global financial markets, and for millions of families and workers . . . a self-inflicted wound of enormous proportions.”
Indeed, this comes following bipartisan debates concerning stimulus for American citizens after helping both domestic and international victims of natural disasters like Hurricane Ida and now, perhaps Hurricanes Sam and Victor.
The shutdown would be a crisis not just for the U.S, but the world. Yellen forewarned that said closure would also bring about a default on its debts—something the U.S has never done. Especially since the country has made economic vows all over the world.
From natural disaster survivors to Afghan refugees and even nations with environmental woes, the U.S. has committed to billions in aid. Although, it would not be the first country this year to do so.
Just last week, President Biden promised $11.4 billion by 2024 to developing countries in climate change efforts. In August, the U.S. vowed to provide $100 million in relief to Afghan refugees. Earlier this summer, Haiti was also promised $32 million after their devastating 7.2 earthquake.
With that in mind, if a more permanent consensus is not reached “the Treasury [may] declare a “debt issuance suspension period” and to take “extraordinary measures” to borrow additional funds for a period of time without breaching the debt ceiling,” House Appropriations Chair Rosa DeLauro, D-Conn. was quoted in Rollcall.
Thus, Congress has two decisions to make very soon: whether to approve the federal budget and raise the debt ceiling, which is the maximum limit of debt the U.S. Treasury can issue the government and its citizens. The governmental branch wields the power to increase the debt ceiling as Democrats want, but previously many Republicans have blocked efforts while others were seemingly dismissive.
“Why don’t y’all just [use a procedural maneuver to raise the debt ceiling without GOP support] and then we don’t have this fight?” Republican Louisiana senator John Kennedy inquired of Yellen and congress Democrats. “Let’s go have a cocktail.”
Senate Republicans were expected to reject a debt limit increase or suspension after the HOR’s affirmative September 21 vote. Yet, GOP politicians joined Democrat counterparts in support.
“This week proved that clumsy efforts at partisan jams do not work,” Minority Leader Mitch McConnell, R-Ky tweeted. “We’re able to fund the government today because the majority accepted reality. The same thing will need to happen on the debt limit next week.”
Likewise, Chuck Schumer expressed a positive outlook on a good outcome. “With so many things to take care of in Washington, the last thing the American people need is for the government to grind to a halt,” he said.
Generally, the federal government’s fiscal year runs from October 1 through September 30 of the next calendar year. Congress was set to meet and decide on the Thursday, September 30 cutoff, when national funding lapsed. Biden’s new measure grants some reprieve as the legislative body meets again in the coming week in regards to the debt ceiling.
What is that?
A government shutdown occurs when the federal government is nearing or has surpassed its allotted budget for the year. Typically, the two ways a government closes are when Congress fails to appropriate funds or the president does not sign an appropriation, or spending bill, into law.
Hence, federal spending halts. This affects non-essential federal agencies, including those applying for Social Security benefits and newly afforded child tax credits, nor operations for national parks or museums.
As well, this means that the feds can no longer afford to pay military personnel and federal, civilian employees. The latter comprised over two million Americans who are likely to be temporarily laid off. Yet, Congress’ salaries nor that of the president would be at risk by the closing.
Although the last government shutdown was “partial,” it was the longest in history, lasting for 35 days under the Trump Administration, from December 2018 to January 2019. Reportedly, “Roughly 300,000 federal employees were out of work, and the closure lowered projected real GDP in the first quarter of 2019 by 0.2%.”
Previously, there was no official statutory limit of new federal debt because the Bipartisan Budget Act of 2019 suspended the limit from its start in August 2019 until July 31, 2021, according to the Congressional Budget Office. On August 1, the debt limit was reset to $22.0 trillion plus any cumulative borrowing during the suspension period.
Before that, the U.S. government has shut down 21 times under seven presidents since 1976. As of July 2021, the agency reports the U.S. spent nearly 7 trillion dollars in the 2021 fiscal year and has a deficit of approximately three trillion dollars.
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Amidst economic turmoil, as a result of the almost two year long global health crisis, the ceasing of government spending impacts economic growth, which is vital to avoid another recession during a financially vulnerable time.
Despite labor shortages rising, unemployment was beginning to slim. However, a government shutdown can impede progress. In addition, there may be up to an anticipated 62 percent of CDC employees anticipated to be furloughed as per Reuters.
Never before has the U.S. and its constituency been at the mercy of economic circumstances like defaulting on debt. As unemployment hangs in the midst, who can this batch of possibly unemployed Americans turn to if not to the country in which they pay taxes?
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