{"id":45056,"date":"2023-05-26T18:57:01","date_gmt":"2023-05-26T18:57:01","guid":{"rendered":"https:\/\/teknomers.com\/en\/with-the-world-economy-as-a-bargaining-chip-news-urix-foreign-news-and-documentaries-2\/"},"modified":"2023-05-26T18:57:03","modified_gmt":"2023-05-26T18:57:03","slug":"with-the-world-economy-as-a-bargaining-chip-news-urix-foreign-news-and-documentaries-2","status":"publish","type":"post","link":"https:\/\/teknomers.com\/en\/with-the-world-economy-as-a-bargaining-chip-news-urix-foreign-news-and-documentaries-2\/","title":{"rendered":"With the world economy as a bargaining chip – news Urix – Foreign news and documentaries"},"content":{"rendered":"\n

The US must cut public spending and raise its country’s debt ceiling. Now they are getting close to getting married, according to media in the US. But not yet about where the cut will come. – I don’t think the entire burden should fall on the middle class and the working class, says President Joe Biden to the press. US President Joe Biden in the White House yesterday. Photo: MANDEL NGAN \/ AFP Agreement present Joe Biden and Republican Kevin McCarthy are nearing agreement on raising the debt ceiling for two years. Finance Minister in the USA Janet Yellen warned last week that a possible failure would “generate an economic and financial disaster” for the USA. American Finance Minister Janet Yellen is clear that June 1 is the “last deadline” for raising the debt ceiling. Photo: BRENDAN SMIALOWSKI \/ AFPAmerican Treasury Minister Janet Yellen is clear that June 1 is the “last deadline” for raising the debt ceiling. Photo: BRENDAN SMIALOWSKI \/ AFP The debt ceiling is also decisive for those of us who live thousands of kilometers away, should the parties not close. If it happens that the American government cannot pay all its bills, there will be financial ripple effects in the rest of the world. US expert Hilde Eliassen Restad and economics professor Kalle Moene explain the most important things about the situation right now. What is a debt ceiling? – How much the state can have in debt can be politically determined, and that is the case in the USA, says Moene. Moene is professor of Economics at the University of Oslo. Photo: Fjeldstad, Knut \/ NTB scanpix The debt ceiling is therefore a politically determined limit that will ensure that the state does not spend more money than the state has. – If it is to be repealed, then they must have a political majority for this. The president cannot administer it himself. That is why Biden is now negotiating with a group in the Republican Party, who have demands they want him to meet before they agree to raise the ceiling. – There are many things that are difficult to foresee in the American economy at the moment. – We don’t have an agreement yet, but I believe we can reach one, McCarthy said after the meeting on Monday. Photo: SAUL LOEB \/ AFP – We don’t have an agreement yet, but I believe we can reach one, McCarthy said after the meeting Monday. Photo: SAUL LOEB \/ AFP – It looks like the polarization has gone so far that people are willing to punish themselves by limiting the president’s powers of action. Why does the US have that debt ceiling? The USA has had a debt ceiling ever since the First World War, i.e. in 1917. – Before that, Congress had to approve every time the Ministry of Finance had to borrow money, says USA expert Hilde Restad. – It was because they needed money to fight in the First World War. This was not to limit the ministry, but rather to give it the freedom to govern itself in an easier and more flexible way. The debt ceiling in the USA was introduced in 1917, so that Congress did not need to get involved in all the decisions of the Ministry of Finance. Here former President Woodrow Wilson addresses the assembly. Photo: Anonymous \/ APG The debt ceiling in the USA was introduced in 1917, so that Congress did not need to get involved in all the decisions of the Ministry of Finance. Here former President Woodrow Wilson addresses the assembly. Photo: Anonymous \/ AP Since then, the ceiling has been raised 78 times. It is only recently that there has been conflict around this process, according to Restad. – It is something that one is forced to do. One has no choice because the USA’s good name and reputation are at stake. – It used to mean that a compromise was made to get it done. But the new reality in Washington DC, due to a radicalization of the right, is that they are turning it around. Because they know it is so important, they use it as a means of blackmail. Who are they challenging Biden now? There are two factions in American politics that have opposed Biden and the Democrats in this fight. Hilde Eliassen Restad follows politics in the USA closely, and has written the book The American Paradox. Photo: Martin Holvik On the one hand, they are called Libertarians, who are very much against government spending, says Restad. On the other is the Trump wing, which occasionally thinks that government spending is fine, as long as the money goes to the “right” Americans. Nevertheless: – It has been a matter of pride for parts of the right-wing in American politics that the state should spend less money in general, and that one should not have a large debt. The Biden administration has so far made a number of changes to have a more generous welfare state, she says. – One of the things the Republicans say they want is that there should be stricter requirements for various welfare benefits. The tiny group within the Republican Party that calls itself the “Freedom Summit” warned this week that they could block an agreement between McCarthy and Biden. Photo: J. Scott Applewhite \/ APD The tiny group within the Republican Party that calls itself ” The Freedom Meeting” warned this week that they could block an agreement between McCarthy and Biden. Photo: J. Scott Applewhite \/ AP Gooda means, among other things, a food program for the poor, or allowances for parents who can’t afford it. The groups Biden is now negotiating with will demand, among other things, that you have to work a certain number of hours to be entitled to social support. What happens if the US does not pay its debt? – Then it’s just as if you’re trying to pay your bills, but you don’t have access to a bank account, says Moene. – You cannot pay what the state apparatus has committed to. It applies to the salary of many government employees, to pay bills for things that the government has already acquired but has not yet paid for. We have not yet seen large fluctuations in the market as a result of uncertainty about the debt ceiling in the USA. Photo: MICHAEL M. SANTIAGO \/ AFP We have not yet seen large fluctuations in the market as a result of uncertainty about the debt ceiling in the USA. Photo: MICHAEL M. SANTIAGO \/ AFP Moene believes that in that case this will create major complications for the American economy, and subsequently elsewhere in the world. It is still not something he thinks will happen. He interprets the negotiations we see now as “games for the gallery”. – If it were to go too far, it would be a disaster, but of course the opposition in the US also understood that. They know about this. – I think that the vast majority of major players here expect that this will work out and lead to a compromise, and that there are therefore not that many reactions from those in the market. Can the negotiations have other consequences? The New York Times reported this weekend that the disagreement over the debt ceiling has already had economic consequences for the United States. Uncertainty around the deadline of 1 June can lead to an unstable economy and higher interest rates when the US government has to take out loans from private players, according to the newspaper. McCarthy and Biden were back at the negotiating table on Monday, but did not reach an agreement within a day. Photo: SAUL LOEB \/ AFPMcCarthy and Biden were back at the negotiating table on Monday, but did not reach an agreement within a day. Photo: SAUL LOEB \/ AFP The latter comes from the fact that you are less certain that you will get the money back when you give loans to the American government, says Moene. – Then, as a rule, you demand compensation for this, i.e. you have to have a higher payment in order to lend money to the American government. – Then it will be more expensive for the state to obtain a loan. I don’t think that effect is very strong, but it can of course be present. Restad believes that the drama that is now playing out on the negotiating table may create different expectations for what can be negotiated in Congress in the future. A bus stop in Washington DC shows the debt to the USA, 22 May 2023. Photo: MANDEL NGAN \/ AFPA bus stop in Washington DC shows the debt to the USA, 22 May 2023. Photo: MANDEL NGAN \/ AFP – If a new precedent has now been established in the USA, for one to be able to hold the debt ceiling hostage, it is very unfortunate as long as you do not have two responsible parties, says Restad. She believes that it often ends up that the Democrats “take responsibility” when the other party is on the back foot in negotiations like this. – The fact that this is such a big deal is yet another proof that the USA is in an unstable period, where you don’t quite know where you have them. It is of course very dangerous for those who depend on the US. – The USA’s relative power is on the way down. This is the kind of thing that only accelerates the process.
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