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The United States threatens with a new "shutdown" of the administration

Diego Pinto
5 min read
The United States threatens with a new "shutdown" of the administration

In the US, the deadline is running out to avoid a partial stalemate in government activities.

If no agreement is reached by Thursday, federal employees would be sent on compulsory leave and authorities would have to shut down.

If the war for political positions between Democrats and Republicans in Congress continues like this, then all authorities will have to close again on Friday and officials without salary will stay at home.

This time, the silence along the corridor is so massive as the United States is insolvent and in default for the first time in its history, Treasury Secretary Janett Yellen said at a Senate hearing.

Yellen also commented that the moment could come from October 18. And since there is no experience for this situation, paint a catastrophic scenario:

"Confidence in the solvency of the United States would suffer and our country faces a financial crisis and as a consequence a recession." And it warns of a collapse of the stock markets.

What's behind the closure?

The US debt ceiling is limited by law.

So much money is currently being borrowed that this limit is reached. This is not new, the line has been raised dozens of times in history, mostly with votes from both parties.

Democrats last participated when Donald Trump needed money for the Corona economic stimulus package.

Republican Sen. Pat Toomey says Democrats want to waste money: "Democrats are on a spending frenzy and they want to expand that too. And if they prevail, we will borrow even more than we would otherwise borrow."

Resistance from both sides

In fact, President Joe Biden has two trillion dollar programs in Congress: one for infrastructure and one for social programs.

It is more in social benefits; and it does not have all the Democrats in the Senate.

However, the left wing of the Democrats in the House of Representatives does not want to accept any money for infrastructure.

In this mixed situation, many use the debt ceiling as another means of political pressure.

Technically, Biden can still sidestep the Republicans if he can get all the Democrats to join. It will take several weeks and it will be meager.

Then what Yellen predicts could happen: "50 million retirees will not receive a pension, our troops would not know when their salaries will arrive."

But aid for hurricane victims or aid from the crown would also end immediately. "The explosion in interest rates makes mortgages as expensive as loan or credit card repayments," Yellen threatens.

Both parties accuse each other of irresponsibility, and both point fingers to blame the other party for a real crisis.

While there is still time for a solution, investors are concerned that the United States will end up slipping into a massive financial crisis due to political stubbornness.

The United States may have a "Closure"

Because Republicans are blocking a budget vote, the United States is threatened with a new "shutdown," and massive restrictions on public life.

In addition, the nation's Congress is fighting for two gigantic investment packages.

The United States is once again threatened with a partial stagnation in government activities.

Republicans blocked a bill in the United States Senate Monday night to secure government funding beyond the end of the fiscal year.

The new financial year begins on October 1, this Friday. If no budget regulation has been decided by then, parts of the government will be "shut down."

Then hundreds of thousands of federal employees would be put on compulsory unpaid leave and numerous public institutions would have to close.

Democrats had already presented a transition budget, but linked it to a suspension of the debt ceiling.

This met with resistance on the part of the republicans, reason why they refused to approve the project in the Senate.

The government threatens insolvency

Without an increase in the debt ceiling by Congress, the US government faces another default in October, according to Treasury Secretary Janet Yellen.

It is not possible to give an exact day, but the government will run out of money "during the month of October," Yellen warned for the last time.

Top Senate and House Democrats Chuck Schumer and Nancy Pelosi accused Republicans of blocking their blockade as totally irresponsible. Schumer announced "new steps" during the week to raise the debt ceiling.

Additionally, Biden is currently fighting to push forward two core projects of his congressional tenure: a large-scale package for investments in the country's infrastructure and a second package for social investments.

The government is fighting for reform packages

The Senate voted in early August for a $ 1.2 trillion infrastructure package that includes massive investments in roads, bridges, rail lines, broadband internet, water pipes and climate change measures.

In addition to Biden's Democrats, some Republicans also voted for the bill.

Now he has to go through the House of Representatives, but there is resistance from the progressive wing of Biden's Democrats.

Left-wing MPs only want to vote for the infrastructure package if the social package advances at the same time.

They fear that it may disappear in the Senate once the infrastructure package has been approved and they no longer have any influence.

The social package is at the heart of Biden's reform plans and would be the largest expansion of the welfare state in America in decades. It provides $ 3.5 billion for education, health care, families, and climate protection over a ten-year period.

Decisions expected this week

The measures will be financed by higher taxes for businesses and the wealthy. Opposition Republicans firmly reject the plans.

However, Democratic senators also have reservations, especially center-back politicians Joe Manchin and Kyrsten Sinema.

Because the Democrats in the Senate only have a very small majority, they cannot afford a single deviator; otherwise, the social program will fail.

Decisions on the two packages are expected this week.