The Republicans present their spending cut proposals three months after the US ‘default’

The countdown for the US to run out of money to pay its expenses and be forced to declare the ‘default’ keep going. The US Treasury needs permission from Congress to issue more public debt, and Republicans (who control the House of Representatives) and Democrats (Senate and presidency) have months without speaking. This Tuesday, in an attempt to launch possible negotiations, the Republicans have presented their proposals for spending cuts and legislative projects that require Joe Biden in exchange for allowing the Government to reissue bonds. But internal divisions in his minuscule parliamentary majority put even that initial move at risk.

The Republican bill would involve allowing the Treasury to issue debt for about another year. In exchange they propose reduce the increase in public spending to 1% per year (in practice, a cut, since inflation is higher than that 1%), ban Biden from forgiving student debt (one of his electoral promises, which is currently before the Supreme Court), cancel all pending public spending on the stimulus packages due to the covid, cancel some of the green energy credits passed by the Democratic Congress last yearrequire that recipients of social assistance be working and make unspecified cuts to social spending items. In addition, they demand that Congress have to authorize all the regulations issued by the Government, and they want to add to all this a energy reform that modifies the one approved by Biden last year, to give more aid to fossil energies and somewhat less to renewables.

The Democrats have already rejected this.”letter to Santa Claus” From the Republicans, who basically demand approval of all their parliamentary wishes in exchange for avoiding the bankruptcy of the country. “Avoiding the ‘default’ of the US is the minimum that Congress has to do. Nobody deserves an award for fulfilling the most basic requirement of their job,” summarized Democratic Senator Brian Schatz. The leader of the Upper House, Chuck Schumer, has pointed out that all those demands will be “dead” as soon as they arrive at your table. And Biden has flatly refused to negotiate: the president has demanded that the debt ceiling be increased and that the Republicans go next to negotiate some projects of their program in which agreements can be reached.

In practice, the goal of the Republicans with this proposal is to bring something concrete to the White House, put the pressure on the government and ask that the Democrats make the move next. And, to paraphrase the saying, if they can’t get Biden to buy them a car, at least they can get a pet at the end of the process.

The biggest problem is that Republicans have a slim majority of just four votesand the internal divisions that forced them to repeat the vote to elect the president of Congress a historic 15 times they are still alive and kicking. Two deputies from the more radical wing have said they plan to vote against of any proposal that involves increasing the debt ceiling, and that if the Government cannot issue bonds, it should make massive cuts in all items until the budget is balanced. A third party has called for the complete repeal of the Inflation Reduction Act, the green energy project against climate change approved by the Democrats last summer. And a fourth has asked to include even more of the Republican program in the “letter to Santa Claus.” Opposite, a member of the moderate wing has threatened to support the Democrats and vote in favor of an increase in the ‘clean’ debt ceiling, without further content, if there is no plausible project from a parliamentary majority.

cards on the table

The dream of the democratsprecisely, is that this republican project is rejected. If that happened, they would argue that the only way to pass anything would be with a bipartisan deal up front, and since all the Democrats will accept is a ‘clean’ increase in the debt ceiling, that’s the only thing that can pass.

The leadership of the House of Representatives intends to bring this bill to a vote next week. As in all this year, every vote can be decisive to find out who has more bargaining power, whether Republicans or Democrats. And the deadline to avoid default is between “late July,” according to the Congressional Budget Office, and “mid-August,” according to Goldman Sachs estimates. Wall Street continues to ignore this crisis, but the risk is on the table: “It is possible that the US enters into suspension of payments,” Schumer warned.