Reference News Network reported on June 6 (text / Zhang Binyang) The high-profile US debt ceiling crisis ended with an agreement between the White House and congressional Republicans, and the US government once again avoided a catastrophic situation of debt default. On June 6, the US Senate approved the debt ceiling agreement reached by Biden and McCarthy. Earlier, the House of Representatives had passed the bill, which had bipartisan support. Under the agreement reached by the two sides, Republicans agreed to suspend the debt ceiling until January 6; The White House agreed to limit the growth of discretionary spending by the federal government over the next two years.
In this farce, which is essentially caused by the US system and is therefore repeated, the market is generally concerned about the financial turmoil and economic crisis caused by the unresolved issue and a possible default. But in fact, in the process of bargaining with Republicans on this issue, another point to watch is the fate of the series of fiscal stimulus measures introduced since Biden took office.
Since taking office, Biden has pushed through a series of bills aimed at strengthening US industrial capabilities, and has carried out massive public investment and tax stimulus for semiconductors, clean energy industries and related infrastructure. Some media called this the US government's "most significant intervention in industrial policy in decades", and called this series of policy measures with semiconductors and new energy as the core "Bidenomics".
Jack Sullivan, the U.S. president's national security adviser, described "Bidennomics" as "a modern American industrial strategy" as an entirely new economic paradigm. MIT Technology Review commented that "Bidennomics" through three major bills jointly committed hundreds of billions of dollars in federal investment in order to change the technology and manufacturing landscape in the United States. These public investment and tax incentives include $5500 billion over the next five years under the Infrastructure Investment and Jobs Act, $2800 billion in the Chips and Science Act, and about $3900 billion in spending on clean energy under the Inflation Reduction Act.
Essentially, the Biden administration's spending spree is aimed at reinvigorating the U.S. economy by rebuilding its industrial base. But in the eyes of market fundamentalists, the Biden administration's industrial policy is "a reckless attempt to pick economic winners"; In the eyes of congressional Republicans, it is the source of runaway government spending. House Speaker McCarthy, after reaching an agreement with Biden on the debt ceiling crisis, wrote in the Wall Street Journal that "the Democratic Party's addiction to spending has caused significant problems." "In Biden's first two years in office, the president spent $1.5 trillion unilaterally by executive order," McCarthy said. He blamed these massive public investments for high inflation not seen in the U.S. for decades, making Biden's policies "unsustainable and irresponsible."
In a bill passed by the Republican-controlled House of Representatives at the end of April, Republicans made the repeal of the Biden administration's green tax breaks a condition for raising the debt ceiling, and demanded the removal of incentives for renewable energy, electric vehicles and other climate-friendly technologies passed by Democrats last year.
But under McCarthy's new agreement with Biden, the repeal of the hundreds of billions of dollars in tax breaks Biden signed to accelerate the transition to low-emission energy and combat climate change is not included. Republicans' previous wishes did not come true. In addition, the new agreement also includes the content of accelerating the environmental review process for energy infrastructure construction.
Market fundamentalists disparage government intervention in the economy, pointing out that companies like Apple, Google, and Amazon are not deliberately nurtured by the government. However, the economic practice of developed countries in recent years has also shown that the government's intervention in the economy through fiscal and industrial policies is of positive significance.
Research by Koo Chaoming, chief economist at Nomura Securities Research Institute, shows that for advanced economies that fell into a balance sheet recession after the 2008 financial crisis, economic stability and growth can only be maintained if the government comes forward to spend money on active fiscal policies. Compared with Europe, which has implemented fiscal austerity, the United States, where the government does not hesitate to spend money, is far ahead in terms of economic growth.
The debt ceiling bill reached this time did not recover tax incentives, which to a certain extent shows that there is a certain consensus between the two parties in the United States on promoting the development of green energy and semiconductor industries.
Still, rising debt remains a concern for the U.S. economic outlook. The Economist weekly analyzed that by 2030, the US government will spend more on interest payments than defense spending every year. Once the economy is dysfunctional and fiscal spending fails to effectively enlarge the economic pie, excessive debt ratios will amplify financial risks or bring down the U.S. economy. The US Wall Street Journal commented on this: "Biden's reputation and legacy are betting on the efficient and effective spending of nearly $2 trillion of taxpayers' money. If done right, the effort could reshape the economy and help him win a second term. At a time when congressional Republicans have promised strict oversight of the administration's spending binge, any mistake could threaten Biden's chances of re-election in 2024. ”