America avoids financial Armageddon but stays in fiscal hell
Soap operas must run indefinitely and therefore never conclude satisfactorily. So it is with the latest episode of a long-running Washington soap opera—its roughly biennial debt-limit drama—which is wending towards a predictably short-lived conclusion. Having threatened the world with a sovereign default and financial disaster in order to achieve their aims, Republicans in Congress have gathered modest concessions from President Joe Biden and agreed that America ought to honour its obligations, after all. The two sides hammered out a deal to raise the government’s debt ceiling, which will let it resume borrowing money—staving off Armageddon for at least the next 18 months. Republican leaders have called the deal, known as the Fiscal Responsibility Act, a historic victory for budgetary prudence. In reality it does nothing to tackle the main sources of America’s fiscal irresponsibility.
This current drama is not fully done yet. On May 31st the deal cleared its toughest hurdle when the House of Representatives approved it by a margin of 314 to 117. It now moves to the Senate, which must pass the bill by June 5th, or Treasury has warned it may run out of cash. A few conservative senators have threatened procedural delays, but in the end passage seems assured. Both Chuck Schumer, the Democratic majority leader in the Senate, and Mitch McConnell, the Republican minority leader, have come out strongly in favour of the deal. In the House support was about as bipartisan as anything is these days in Washington, with backing from two-thirds of Republicans and four-fifths of Democrats.
The headline summary of the deal seems impressive. The Congressional Budget Office, a neutral scorekeeper, calculates that it will reduce spending by about $1.3trn over the next decade. When cuts are measured in the trillions rather than the billions, they are, by definition, big. The trouble is that federal spending is in…
2023-06-01 02:40:22
Post from www.economist.com
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