Clash of the Titans: The Budget Default War Continues

by Wall Street Rebel - Michael London | 03/09/2023 8:10 AM
Clash of the Titans: The Budget Default War Continues

The Chairman of the Federal Reserve, Jerome H. Powell, recently testified before a Congressional committee and said, "Congress raising the debt ceiling is really the only alternative."


While he spars with Republicans over the appropriate size of the federal government, President Biden will present a budget on Thursday that is unlikely to influence tax or spending choices in Congress this year but will serve as a declaration of political goals.

Mr. Biden's third budget plan as president is an effort to promote a narrative that the president is dedicated to investing in American manufacturing, battling corporate profiteering, decreasing budget deficits, and fending off Republican assaults on safety-net programs.

It is likely to feature Mr. Biden's efforts to encourage high-tech industrial employment and combat climate change, as well as substantial spending on the military and tax hikes on corporations and the wealthy. The White House also expects it to include about $3 trillion in additional deficit reduction.

Sometime this spring, Republicans are anticipated to present a drastically different budget to reduce the budget deficit within a decade without increasing taxes. This budget is expected to be full of cutbacks to government health programs and helps the poor. It's likely such plans won't win over Mr. Biden and moderate Republicans, making it difficult for them to clear the House.

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At a time when there is a lot at risk for both the national and international economies, the dueling papers will underscore the fact that Mr. Biden and his opposition party do not have a lot of common ground when it comes to fiscal policy. This is the case even though the president and Republican members of Congress are embracing the politics of vowing to cut deficits and the increase of the national debt, which surpassed $31 trillion before the end of the previous year.

House Republican leaders have declared that they would not remove a congressionally mandated restriction on the amount of money the federal government is authorized to borrow unless Mr. Biden agrees to major cutbacks in the amount of money that the federal government spends. If the United States government runs out of money and defaults on its debt later this year, the economy might be thrown into catastrophe. The United States borrows massive sums of money every year to meet its financial commitments.

Mr. Biden has declined to link any reductions in spending to the increase of the borrowing ceiling, which does not enable any additional expenditures, but he has said that he is open to discussion over the most effective ways to reduce the burden of the nation's debt.

The parties' hard-line stances ensure that Washington will be engaged in contentious debates over the debt ceiling for at least many more months. Analysts are warning that the current impasse will shake investors' confidence and pose rising risks to the international financial system.

The Chairman of the Federal Reserve, Jerome H. Powell, issued a warning to legislators on Wednesday, urging them not to play games and stating that there is no way to avoid a financial crisis without increasing the limit on the amount of money that may be borrowed.

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Presidential budgets will inevitably provide competing views for the nation's fiscal policy, and budgets that presidents present to chambers of Congress that are controlled by the opposition seldom serve any purpose beyond that of propaganda materials. In many cases, including when Mr. Biden was Vice President, a significant portion of the budget could not pass muster with the president's party.

Despite the Democrat's control of Congress, the more than $2 trillion in tax hikes included in the previous year's budget were never implemented. Mr. Biden could not convince a sufficient number of Democrats to adopt several of the policy initiatives detailed in his previous budget proposals. These policy priorities included federally mandated paid leave and free community college.

Despite this, the budget documents that will be released this year by President Biden and the Republicans in the House of Representatives carry an increased level of significance due to the stakes involved in the battle over the debt ceiling as well as the limited avenues for compromise on fiscal policy that the documents are anticipated to reveal.

To pay for his policy priorities and to reduce the growth in America's reliance on borrowed money, Mr. Biden's budget will raise taxes on corporations and high earners, including a tax of 25 percent aimed at billionaires. This will be done to pay for Mr. Biden's policy priorities and reduce the growth in America's reliance on borrowed money.

According to projections made by the Congressional Budget Office, the deficit in the federal government's budget will increase by a marginal amount during the current fiscal year, going from $1.375 trillion to $1.41 trillion. It will continue to rise throughout the decade, passing $2 trillion in 2032.

These increases are being driven in part by the rising costs of Medicare and Social Security as members of the baby boom generation reach retirement age, as well as by the growing cost of servicing the nation's $31.4 trillion debt as a result of a series of rapid interest rate increases implemented by the Federal Reserve to tame high inflation. Mr. Powell reported to legislators on

According to projections made by the budget office, the entire amount of deficits would exceed $20 trillion between 2024 and 2033, bringing the gross amount of government debt to around $52 trillion.

If all of Mr. Biden's suggestions were implemented, the rate of that increase might be cut by around 15 percent. They do not have a good chance of being true. Already this year, Republicans have made attempts to reverse tax hikes as well as savings measures for Medicare prescription drugs that Obama signed into law the previous year.

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According to estimates provided by the Committee for a Responsible Federal Budget in Washington, Mr. Biden has approved policies that would add approximately $5 trillion to the national debt over the course of a decade through a combination of new laws he has signed an executive actions he has issued. They include his debt relief program for some student loan debtors and his economic assistance law for 2021, both of which are now being challenged before the Supreme Court.


                      U.S. could default on its debt as early as July, Congressional Budget Office warns

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