The CEO who is worth a billion dollars says that the United States will stop paying its debts. He wants to know when this default will happen, not if it will happen.
This argument is what makes Washington and Wall Street nervous.
Will the United States stop paying its debt because of political disagreements and posturing between the White House and Kevin McCarthy, who is the Republican House Speaker?
Last Tuesday, the date that was supposed to be the default date got closer. The money from income tax seems to be less than planned. Analysts at Goldman Sachs said that the fateful day would come early in June, not early in August.
For now, Democrats and Republicans are still blaming each other for the current situation and the lack of flexibility, even though they are the ones who hold the key to stopping this disastrous scenario for the American and global economies.
McCarthy talked about the Republican plan to keep the U.S. from going bankrupt on April 17 at the New York Stock Exchange. He wants a one-year break from prison. To do this, the debt limit must be raised. He said that his party, the Grand Old Party (GOP), will only vote for it if it includes budget cuts and steps like making people work to get solidarity allowances.
Increasing the limit on the debt…
Two days after that, he gave the lawmakers his 320-page bill. He said that he wanted a vote on it to start next week. He wants to add $1.5 trillion to the debt limit. In January, the U.S. debt hit $31,400 billion, which is the limit beyond which the country can’t sell any more securities to pay for itself.
Temporary emergency steps have been taken to keep paying the debt, but if Congress doesn’t agree to raise this ceiling, the United States will default, which means it won’t be able to pay its bills. This could happen as soon as this summer. This would send the economy of the United States and the world into the dark. Early in March, Jerome Powell, the head of the Federal Reserve, said that raising the debt ceiling was the only way for the country to pay its bills on time.
McCarthy wants to cut spending by $131 billion in 2024, bringing it back to where it was in 2022, which is $1.47 trillion. He wants the federal government’s spending to grow by no more than 1% per year for the next ten years. He didn’t give many more details, but he did say that health insurance plans for people over 65 and pensions would not be affected.
Right-wing Republicans have won two big battles: the plan to rethink the budget increase for the Internal Revenue Service (IRS), which was meant to help fight tax evasion, and the new tax credits for clean industries, which were passed as part of the Inflation Reduction Act (IRA) last summer.
Goldman Sachs says that McCarthy was right when he said that the cost of these tax payments could go up to $1.2 trillion.
It wasn’t a surprise that the White House and Democrats didn’t like the McCarthy plan. McCarthy’s ideas were not clear, so President Joe Biden criticized him for it. He did this because he knew that the Republican leader would have to jump through hoops to bring together moderates and rebels in his party. “Give me a plan, not a speech,” joked Biden, who hopes to run for president again in 2024.
“Speaker McCarthy sided with the extreme MAGA wing of his conference and put out a plan to hurt hard-working American families,” said Press Secretary Karine Jean-Pierre about McCarthy’s plan. “MAGA The Republicans in the House are holding the economy of the United States hostage so that they can cut services that people use every day to make ends meet.
“A Question of When”
She said, “House Republicans must avoid a default and stop playing economic chicken with the jobs and retirements of the American people. The people of the United States have made it clear which economic plan they back.”
The White House kept going after McCarthy on social media, saying how bad he was.
“Not paying the United States’ debt. Getting you to pay for it. “That’s the only plan from the House Republicans on the table,” the Biden White House said on Twitter on April 18.
Elon Musk, who has started a lot of businesses and is the CEO of Tesla, has heard these complaints. The millionaire, who has become the most powerful boss in the world, used the White House tweet to send a very scary message.
He says that the United States will have to stop paying its debts at some point. When this will happen is the question. Since a few months, the millionaire has become a symbol for conservatives. He seems to think that Democrats and Republicans won’t work together, so he rules out a deal at the last minute.
“Given how much the government spends, it’s not a matter of if we default, but when,” Musk said, without giving more information.
Investors and global markets fear a default by Washington because it would make an already scary economic situation even worse. Inflation is still at levels not seen in 40 years, making customers more cautious. If people spend less, the economy would suffer a lot. Raising the debt cap is a technical measure, but it needs the approval of Congress, which it usually does without much discussion. The U.S. Treasury Department says that since 1960, the debt limit has been raised 78 times.
