The trillion-dollar split of the US Democratic Party

MOSCOW, 06 Oct 2021, RUSSTRAT Institute.

The previous week turned out to be very nervy for the US leadership. Congress had to decide on the issue of financing the government and raising the level of public debt. Although the US debt ceiling has already been raised 78 times, the current situation is unlike any of the previous ones, as it revealed an obvious split in the Democratic Party, which holds a majority in both chambers of Congress.

This story should begin with the fact that in August, shortly before the “US fiasco in Afghanistan”, the Joe Biden administration managed to agree in the US Senate on an infrastructure plan “build back better” for $1.2 trillion. This electoral promise of Joe Biden was agreed upon with the participation of some Republican senators, who gave the necessary majority of 60 votes out of 100.

Some representatives of the Republican Party then openly called these senators traitors. It remained only to pass this bill through the House of Representatives, where the Democrats have enough of their majority to confirm the Senate’s decision.

The progressive wing of the Democratic Party in the House of Representatives, with the assistance of Senator Bernie Sanders, as the head of the US Senate Budget Committee, has developed another bill – a $3.5 trillion budget plan, thanks to which changes in the US social infrastructure are generously funded, from direct benefits to previously unseen state funding of kindergartens, as well as a new climate agenda.

Thanks to the specific procedure of “reconciliation”, which is used when approving the budget, the Democrats had enough of a simple majority in both chambers of Congress to pass this bill.

Although the leadership of the Republican Party announced in advance that Republicans in both chambers would not vote for these legislative initiatives and for raising the US national debt ceiling, the Democratic Party has enough tools to pass the relevant legislation on its own. For example, by including provisions on raising the national debt in the bill for $3.5 trillion.

There are several reasons for this behaviour of Republicans. Firstly, the Democratic Party had previously passed a bill on financing anti-coronavirus measures only by its own majority, ignoring the opinion of Republicans. Secondly, on the eve of the 2022 Congress elections, Republicans want to shift responsibility for the accelerating inflation in the United States to the Democrats because of their huge spending.

The head of the Democrats and Speaker of the House of Representatives Nancy Pelosi, according to the agreements of the Democratic party factions, was supposed to vote on these bills in one package on September 27. However, 2 Democratic senators have publicly stated that they will refuse to vote for the $3.5 trillion bill if it is approved in the House of Representatives. Explaining that such spending is excessive and putting forward a demand to cut the bill to $1.2 trillion. Representatives of the liberal media immediately dubbed them “enemies of democracy”.

After that, Nancy Pelosi agreed to hold a separate vote on the bills and start with Biden’s infrastructure plan. However, the progressive wing of the Democratic Party, numbering up to 100 members, has already opposed, saying that in this case they will not vote for Biden’s infrastructure plan. Senator Bernie Sanders also supported this position. Naturally, the vote fell through, and Nancy Pelosi postponed the vote to September 30.

The essence of what happened is very simple – the progressive wing of the Democratic Party has banally stopped trusting the rest of the Democrats and is afraid that after they vote for Biden’s 1.2 trillion plan, their 3.5 trillion bill will no longer be supported, and the centrists of the Democratic Party will impose their conditions on them.

It should be understood that the planned expenditures of this budget are part of the plan of the progressive wing of the Democratic Party to transform American society, when the state assumes more and more social responsibility and intervenes in those areas where previously only private business operated. They are well aware that they may not have another chance for such drastic changes.

In connection with what is happening, Joe Biden canceled his presidential visit to Chicago, scheduled for September 29, and scheduled meetings with rebellious Democratic senators to resolve the conflict. It was necessary to act quickly in order to meet the new deadline for voting.

On September 29, the House of Representatives, split along party lines, supported the initiative to finance the government and suspend the public debt limit until December 16, 2022. Republicans in the Senate blocked the debate on this bill, but hinted that they were ready to agree on a bill only on temporary financing of the government.

On September 30, the House of Representatives and the US Senate quickly passed a law on the temporary financing of the federal government until December 3, 2021, which was immediately signed by Joe Biden. However, it omitted an item on the financing of one of the directions of the US Department of Transportation, and therefore he urgently had to lay off 3,700 people.

However, the issue of voting on the “build back better” plan and “social infrastructure” did not budge, centrist Democrats accused the progressive wing of taking the bill of “Biden’s electoral promises” hostage.

Some political scientists have already started talking about the fact that what is happening may determine the outcome of the midterm elections in 2022, and the emerging split in the Democratic party, ultimately, may lead to its demise. The Hill published an article with the headline: Democratic civil war hits new heights. On September 30, Nancy Pelosi missed the second deadline for the ill-fated bills, despite all the promises.

On October 1, Joe Biden arrived at the Capitol and met with the full House of Representatives Democrats. After the closed-door meeting, it became known that Joe Biden proposed to reduce the bill on “social infrastructure” from $3.5 trillion to $2 trillion. He made it clear that he wants the two bills to pass by one vote as part of an intra-party agreement.

Politico reporter Sarah Ferris gave inside information from the last meeting: it turns out that after his proposals, Joe Biden wanted to answer questions from fellow party members, but representatives of the White House forbade him to do so.

As a result, passing by journalists, Joe Biden said: “It doesn’t matter if it takes six minutes, six days or six weeks, we are going to do it,” explaining the state of affairs concerning the bills. Representatives of the progressive wing said that if they have to cut their $3.5 trillion bill, they want to keep all its targets, simply by cutting the term of their funding.

“So what was decided at the expense of raising the US government debt ceiling?” – an inquisitive reader will ask. The head of the US Treasury Department, Janet Yellen, has already warned that the government’s funds will run out around October 18 and suggested that Congress simply lift the limit on public debt.

Against the background of the ongoing mess, on September 30, Fitch Ratings agency announced that the US’ AAA sovereign credit rating could be lowered if congressmen could not solve the problem of the national debt ceiling in a timely manner. The latest failure in Congress “indicates that the current standoff may be one of the longest since 2013”.

The American media, of course, sorted out alternative scenarios. Someone tried to refer to the 14th Amendment to the Constitution, which states “The validity of the public debt of the United States, authorised by law <...> shall not be questioned” however, the funding is within the powers of Congress and the unilateral actions of the government, in this case, lead to a constitutional crisis.

Thanks to a loophole in the legislation regulating the minting of coins, the US Treasury Department can issue coins of any denomination. Therefore, since 2013, there have been proposals to issue a platinum coin with a face value of $1 trillion to redeem the Fed’s debt. The chairman of the House Judiciary Committee, Jerry Nadler, recalled this idea at the last meeting of Democrats. Representatives of the progressive wing, of course, supported him.

As the Washington Post writes, Joe Biden’s aides have considered these options, examining whether the government can make payments even if the US debt ceiling is exceeded. As a result, they came to the conclusion that, without falling out of the legal field, this issue can be resolved only through Congress.

Democrats expect that Republicans are simply bluffing, threatening not to support an increase in the US debt limit. “It is incomprehensible to me … that you have a Republican Party that would allow the largest economy to default on our loans and money that has already been spent, especially spent during the Trump administration,” Bernie Sanders said. “But I dont think thats going to happen. I think Republicans may be a little bit crazy, but theyre not that crazy,” he said.

“Well, I hope Republicans wont be so irresponsible as to refuse to raise the debt limit and to filibuster the debt limit,” Biden told reporters on October 2. “That would be totally unconscionable. Never been done before. So I hope that wont happen”.

On October 4, Joe Biden made a separate speech on the need to increase the US national debt. He tried to shift the responsibility to the previous president, Donald Trump, under whom a quarter of the total US debt that arose was occupied.

“A failure to raise the debt limit will call into question Congresss willingness to meet our obligations that weve already incurred — not new ones; weve already incurred.  This is going to undermine the safety of U.S. Treasury securities.  And it will threaten the reserve status of the dollar as the worlds currency that the world relies on,” Joe Biden said.

Then he attacked the “hypocritical, dangerous and disgraceful position of the Republican Party. So, lets be clear: Not only are Republicans refusing to do their job, theyre threatening to use the power — their power to prevent us from doing our job: saving the economy from a catastrophic event <…> just get out of the way,” Biden said.

Whether the Republicans will keep their promise remains to be seen. However, now it can be recorded that there has been another serious split in the US political system, this time in the Democratic Party itself, and Joe Biden does not have the proper authority to quickly resolve this conflict. By playing political games, the US elites are already risking not just the moral authority of the country, but its economic well-being. And this is good – the decline in the economic potential of the United States will sooner or later affect America’s military-political capabilities.

Institute for International Political and Economic Strategies – RUSSTRAT

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