Two days ago, there was a slowdown in Germany’s figures. You must have understood the meaning of recession in the world’s fourth largest economy. Neither London is far away, nor Berlin nor Rome. Now the closest is New York. Yes, there could be a recession in New York after June 5th. This is because of the non-availability of a solution to the US debt ceiling. If America does not find a solution before June 1 or the US government does not increase the debt limit, then the world’s largest economy will be in the grip of recession. It will then add a chapter in American history that will be dark not only for the American economy but for the entire world.
83 lakh jobs will be lost in America alone and this figure will reach in crores all over the world. The US GDP will fall by more than 6 percent, so the fate of the global economy can give you a headache. So has the countdown to the collapse of the US economy begun, from which no one is getting a chance to escape? Or by June 5, the government will take some such decisions to save the economy of America as well as the world.
No money if Biden cancels foreign trips
The current situation in America has become so bad that President Joe Biden has had to cancel his foreign tour. There is also no cash of $ 55 billion in hand. Every day about one and a half billion dollars have to be paid in interest. Come, today it is necessary to open and read the economic page of America, due to which the world’s largest economy has become like this.
But before that, understand the warning given by US Treasury Secretary Janet Yellen in a letter to the speaker of the US Congress. If America does not increase the debt limit by June 5, then there will be a big economic and financial storm in America. America will be the defaulter for the first time.
US federal government employees will be laid off, global stock markets will crash, and the US economy is likely to be hit by a crisis. That’s why it is everyone’s responsibility to understand this and it is also everyone’s responsibility to take care of it, because all the countries of the world that have economic relations with America will come under its clutches.
Is there really a loan limit?
The debt ceiling is a limit on the amount the US government can borrow to pay for services such as Social Security, Medicare, and the military. Every year the government generates revenue from taxes and other streams such as customs duty, but spends more than what it takes in. As a result, the government has been losing $400 billion to $3 trillion every year for the past decade. The remaining deficit at the end of the year is added to the total debt of the country.
To borrow money, the US Treasury issues securities such as government bonds, which are eventually paid back with interest. Once the US government reaches its debt limit, the Treasury cannot issue any more securities, which restricts the flow of funds to the federal government. The US Congress sets the debt ceiling, which currently stands at $31.4 trillion. The debt ceiling has been increased 78 times since 1960. Last time this date limit was extended till 2021.
What if America defaults?
America has never defaulted in its payments before. So what exactly will happen is not clear, but that much is certain that the results will not be good. US Treasury Secretary Janet Yellen said in a letter to Congress in January that failure to make ASAR payments would result in serious damage to the US economy, the livelihoods of all Americans and global financial stability. Investors will lose confidence in the US dollar, which will lead to a rapid weakening of the economy. There will be job cuts. The US federal government would not have the means to continue with all its services. Interest rates will rise and the housing market will collapse.
Why is America in so much debt?
The US debt grows when the government spends more money or when it has less revenue. Throughout its history, America has had at least some amount of debt. But after Ronald Reagan’s massive tax cuts in the ’80s, America’s debt actually began to grow. In the absence of higher tax revenue, the government had to borrow more and more money to spend.
During the 1990s, following the end of the Cold War, the government reduced defense spending. Tax revenue increased due to a booming economy. Then, in the early 2000s, the dotcom bubble burst, sending the US into a recession. George W. Bush cut taxes twice, in 2001 and 2003, and then US military operations in Iraq and Afghanistan increased spending during the war by nearly $6 trillion.
When the Great Recession of 2008 began, the government had to bail out banks and spend to increase social services as the unemployment rate reached 10 percent. In 2017, Donald Trump’s administration rolled out major tax cuts when the unemployment rate returned to its pre-recession level. America’s debt increased by $ 7.8 trillion during his tenure. After that the period of Covid 19 epidemic started. The US government has announced a $5 trillion relief package to deal with the worst effects of the pandemic.
Where does the government spend the most?
The largest portion of US government spending is on mandatory programs such as Social Security, Medicaid, and Medicare, comprising about half of the total annual budget. Military expenditure is 12 percent of the budget. In addition, expenditures are made for education, job training and services, and for the benefit of American veterans.
Why is Congress not increasing the loan limit?
On April 26, Republicans passed a bill in the House that would raise the debt ceiling by $1.5 trillion but order $4.8 trillion in spending over a decade. That’s why Democrats have refused to negotiate spending cuts within debt limits. Lawmakers including Alexandria Ocasio Cortez have argued that Republicans should be talking about spending cuts during budget negotiations, not the debt ceiling.
Still, Republicans are sticking to their word, pushing Democrats to agree to spending cuts and for the first time trying to sway Democrats by resorting to the vague threat of default. He adopted this maneuver in the year 2011 as well, in which he was also successful. While Democrats agreed to cut spending 72 hours before the government defaulted. This time if the deadlock does not end and the government is not ready to bow down, then the American economy can be brought very close to destruction.