Author of this article: Cuckoo
This article only represents the author's opinion and does not represent the position of this account
U.S. debt has exceeded the upper limit! The U.S. debt crisis, known as the most serious since 2011, has arrived at the doorstep of the United States. Once it explodes, it is likely to affect the whole world. China's actions seem to have focused the attention of the United States, but the current struggle between the two parties is unprecedentedly fierce, and neither of them is interested in truly solving the problem. The Democratic Party wants to continue to postpone the issue, while the Republican Party is afraid that the U.S. debt bomb will detonate during the Democratic administration.
On January 17, local time, the White House warned Congress that it must "unconditionally resolve the debt ceiling issue" because the current U.S. debt has reached an unprecedented level and is about to reach the legal limit of approximately US$31.4 trillion.
The U.S. debt problem cannot be underestimated, such as the "U.S. debt bomb explosion." International Monetary Fund First Vice President Gopinath predicts that it is likely to cause the most serious financial risk since 2011.
However, in the face of such a serious crisis, the two parties in the United States are still deeply divided, and both want to use this issue to blackmail the other party into making concessions. If the United States does not solve this problem quickly, there is no hope of effectively solving the U.S. debt problem.
According to real-time data from the U.S. " U.S. Treasury Clock" website, as of the morning of the 18th local time, the U.S. government debt has exceeded the legal limit of $31.4 trillion, even one day earlier than U.S. Treasury Secretary Yellen's previous forecast. According to CNN (CNN), the jaw-dropping figure of 31.4 trillion US dollars means that the ratio of U.S. debt to gross domestic product has soared to about 120%, reaching the highest level since the end of World War II. According to Yellen's estimation, if this situation is allowed to continue, the U.S. treasury funds will dry up as early as early June this year, leading to an "unprecedented" debt default. Regarding Yellen's forecast, the most optimistic scenario for the United States is to postpone the debt default to August through administrative means.
The bad result of debt default is that the U.S. government "shuts down" again, which subsequently triggers a series of serious problems including a freeze on federal benefits, a rise in consumer interest rates, a stock market crash, an economic recession, and a downgrade of the U.S. credit rating. These problems will cause chaos in financial markets and completely undermine the economy and touch every aspect of American society. For example, tens of millions of people will lose their social security, medical insurance and other related subsidies, and a large number of people will face unemployment.
In the past few decades, the US government has caused three crises due to debt problems.
In 1995, when the U.S. debt ceiling issue arose, the Clinton administration insisted on its views and had a serious conflict with Congress, which ultimately led to a three-week shutdown of the U.S. government.
In 2013, the Obama administration had conflicts with Congress over debt issues and health care reform issues, shutting down the US government again for 17 days. The most recent one was in July 2019. As the US election was approaching, the two parties in the United States reached a rare agreement on the "Bipartisan Budget" and announced that they would suspend the review of the US debt ceiling within two years. Although this agreement prevented the Biden government from shutting down, it also caused the U.S. national debt to soar to the current US$31.4 trillion.
In other words, the two parties in the United States have not actually solved any problem. They have just postponed the problem for a few years and allowed the debt bomb to accumulate "more ammunition" and become more powerful.
But the current situation is that with the sharp conflicts between the two parties in the United States, it is extremely difficult to get the two parties to put aside their prejudices and tide over the difficulties together. The Democratic government takes control of the Senate, while the Republicans control the House of Representatives. Under the lame duck government, the Republican offensive becomes more fierce.
US media reported that the Republican Party now intends to use the debt ceiling as leverage to push Congress to pass a comprehensive budget bill to reduce the deficit. The Democratic Party does not want to compromise on this point, and negotiations between the two parties have reached a deadlock. Republicans who control the House of Representatives have said they will not approve any bill that would raise the debt ceiling until government spending is significantly reduced. Speaker of the House of Representatives McCarthy even made a strong statement on January 12, saying that Republicans will not allow "waste of money."
What is even more noteworthy is that the US media Politico reported that some Republican congressmen have formulated a "debt prioritization plan." This means that these Republican congressmen are already arranging post-collapse plans and discussing the order and objects of debt repayment. Naturally, it was the Democratic government that took the blame for the collapse of the U.S. debt. The Democratic Party was only happy when the U.S. debt bomb bombed the Republican Party.
In this regard, the US investigative news website VOX likened the US debt ceiling issue to an "apocalyptic 'Groundhog Day'". They said that the two parties now "will never do one thing in the debt ceiling debate is to solve the debt problem."
" The New York Times " commented even more sharply: "The polar opposition in American politics has turned a tool for maintaining fiscal responsibility into a recipe for creating economic disaster."
Faced with the never-ending wrangling between the two parties, Yellen, as Treasury Secretary, can only "solve" the current crisis by trying to heal the head and feet.
On the one hand, she announced that special measures to raise the debt ceiling would begin on Thursday. The "bond issuance moratorium period" will begin on Thursday, January 19, 2023, and last until Monday, June 5, 2023. On the one hand, after she had just spread remarks that discredited China in Africa, she rushed to Zurich, Switzerland to meet with Chinese Vice Premier Liu He, hoping that China could come forward to help the United States tide over the difficulties.
The U.S. Treasury Department’s statement said that the talks were “candid, substantive, and constructive.” Yellen also expressed that she looked forward to “traveling to China in the near future and welcoming Chinese counterparts to visit the United States.” The reason why Yellen is full of expectations for China is obviously because China has reduced its holdings of U.S. debt for three consecutive months. China's holdings of U.S. debt have dropped to $870 billion, setting a new low since June 2010. For the U.S. debt problem, the most important thing now is to find reliable creditors who can support its debt.
China’s performance is to express its attitude with practical actions. In particular, the United States has been provocative and suppressing China in recent years, which has caused significant changes in China's attitude towards U.S. debt.
However, the current debt problem in the United States cannot be solved by external forces. The US debt of more than 30 trillion is like a time bomb. If you are not careful, it will plunge the entire United States and the entire world into a serious economic crisis . The current state of partisanship between the two parties in the United States has no intention of solving this problem. The next problem will be difficult for Yellen alone to solve anyway. If the United States wants to get out of this debt problem, all it needs is bipartisan cooperation to tide over the difficulties, or repeating its old tricks of printing money like crazy.
Judging from the current situation, the latter is much more likely than the former. However, this method of treating the symptoms rather than the root cause has no other results except making the US national debt larger and more destructive in the future. Under the current political situation in the United States, there is no hope for cooperation between the two parties. The Republican Party is afraid that it would rather collapse than destroy the Democratic Party. If you are not an American, try to hide as far away as possible and let them solve this problem internally.
