US Senate Republican leader McConnell sent a letter to President Biden on the 8th, stating that the Republican Party will not help the Democrats to raise the federal government debt ceiling again in the future. The Democrats can only use the budget adjustment process to solve the debt ceiling problem alone.
On the 7th, the Democratic and Republican parties of the U.S. Senate passed a bill to raise the federal government’s debt ceiling temporarily, temporarily raising the debt ceiling by about $480 billion to ensure that the Treasury Department can fulfill its payment obligations until December 3.
Later, some Republican senators publicly criticized McConnell for "too fast" compromise with the Democrats on raising the federal government's debt ceiling, believing that the large-scale fiscal expansion promoted by the Biden administration is detrimental to the U.S. economy.
Some analysts said that McConnell stated that he would no longer cooperate at this time. The two parties may also be fighting over the debt ceiling in December, and the risk of federal government debt default will rise again.
In recent years, the debt ceiling has increasingly become an important bargaining chip in the political game between the two parties in the US Congress.
Almost every few years, the two parties have to stage a political "farce" that stirs the nerves of the global market. Individual politicians even push the United States to the "edge of the cliff" of debt default at any cost to gain political capital.
Even some U.S. lawmakers commented that it is no longer possible to describe in words how absurd the debt ceiling is reduced to a tool of partisanship.
U.S. debt "bomb" fuse is difficult to dismantle, political malpractice threatens the world
Although the two parties often reach an agreement before the deadline for debt default, the frequent occurrence of debt ceiling crises reflects the serious disadvantages of the difficulty of finding consensus in the US society, the failure of the governance system, and the political credit overdraft.
This has not only become an important source of risk for US economic growth and capital market volatility, its spillover effects have also spread to the world through US debt, US dollars and financial markets, threatening world economic recovery and global financial market stability.
The debt ceiling default crisis in August 2011 was the US’s closest to a “technical” default. It caused violent fluctuations in the capital market and led to the first sovereign credit downgrade in US history.
At that time, US short-term Treasury bonds were sold off and interest rates soared, the US stock market experienced a sharp correction, and economic growth was dragged down.
Emerging markets and developing countries are also forced to pay higher interest rates for their US dollar-denominated bonds.
If the consequences of a real default on U.S. bonds will be more serious, economists generally believe that it will cause an "economic disaster", including triggering a surge in interest rates, a sharp drop in stock prices and other financial turmoil, and the U.S. economy will return to recession.
At the same time, the current global economy has not fully recovered from the new crown epidemic. Once the US debt default triggers a global financial crisis, it may be worse than the 2008 international financial crisis.
In the long run, the U.S. debt ceiling crisis will also severely overdraft U.S. political credit, weaken the credibility of U.S. Treasury bonds and the status of the U.S. dollar as a reserve currency.
American think tank Brookings Institution consultant Amadou West said that this provides more reasons for the BRICS and African countries to request governance reforms of international financial institutions such as the International Monetary Fund and the World Bank.
Some economies will also consider promoting the diversification of foreign exchange reserve assets and gradually reduce their dependence on US Treasuries.