Why GOP Has Good Reasons to Block Dems' Bill to Raise Debt Ceiling & Avert Government Shutdown

The House approved the stopgap legislation last week to extend government funding through 3 December. In addition, the bill includes a debt limit suspension through 16 December 2022. However, the legislation failed in the Upper Chamber on a 48-50 party-line vote with no GOP lawmakers supporting the measure. The Senate GOP has put forward its own legislation that would fund government agencies at their current levels for forthcoming nine weeks, but would not suspend the debt ceiling. Top Democrats lambasted their Republican counterparts for what they called "obstruction and irresponsibility," claiming that the GOP actions "show a lack of concern about [the US] economic recovery."

Are Default Clouds Gathering on America's Horizon?

The government funding is set to expire on 30 September which means that from 1 October there will be a shutdown. In addition, Treasury executives and Democratic policymakers are warning about a "catastrophic" default in less than three weeks unless the debt limit is suspended. In an op-ed published in The Wall Street Journal, Treasury Secretary Janet Yellen wrote that "in a matter of days, millions of Americans could be strapped for cash." If the US defaults, it would "likely precipitate a historic financial crisis," "trigger a spike in interest rates, a steep drop in stock prices, and other financial turmoil," she wrote.

The situation is not as dire as the Democrats are trying to depict it, argues Wall Street analyst and investor Charles Ortel.

"The government 'shutdown' does not mean cessation of all government activities," Ortel explains. "In fact, a shutdown now might highlight how much Americans waste each year on non-essential services and that we can get along just fine with a much smaller amount of annual government spending. As for default, we are not close to doing so and likely will not do so for quite some time even if Democrats accelerate the growth in government spending for some years or decades to come."

The investor points out that "US government yields have risen substantially in recent months and are positive." Despite the US being divided politically, its economic conditions and prospects are better than in Europe, Japan, and China, the analyst argues.

"So, compared to other nations and currencies, many American debt and equity securities seem more sensible as investments than paying for the privilege of letting a European or Japanese bank hold deposits in a foreign currency," he emphasises.

Speaker of the House Nancy Pelosi, D-Calif., speaks with Senate Majority Leader Chuck Schumer, D-N.Y., during Paid Leave for All rally on Capitol Hill in Washington, Wednesday, Aug. 4, 2021.

Dems Want to Share Responsibility With the GOP

Apparently, Republican lawmakers are guided by the same logic as they remain relatively calm. Sen. Pat Toomey (R-PA) told CNN last Sunday that "there is no calamity that’s going to happen" since the Democrats can amend the budget resolution and "pass the debt ceiling all by themselves" at any moment.

"If that were even a serious risk, don’t you think the equity markets from last week, rather than fully recovering after the scare that came out of Evergrande in China, rather than fully recovering, as they did, maybe they would have traded off?" Toomey asked CNN host Jake Tapper.

One might ask why the Dems are making a fuss over the GOP's refusal to suspend the debt limit. The answer is simple, according to Ortel – the Democratic Party wants to share responsibility for the extending already bloated debt with the GOP and went on a reckless taxing and unprecedented spending spree.

In particular, the Dems are seeking to pass a $3.5 trillion bill, something that the Republicans vehemently oppose considering it a wasteful spending and warning that accompanying tax hikes would deal a heavy blow to the US' post-COVID economy.

"Underlying the present 'debate' is that huge spending plans cannot be paid for solely by 'the rich,'" Ortel says. "Honest accounting, should any be performed, will demonstrate that each American will suffer and that the bottom 50 percent will be hurt most by inevitable consumer price inflation that will rage should Democrats push the Biden/Pelosi agenda across the finish line."

'Americans Losing Faith in Both Parties'

The Wall Street analyst points out that "the current fight comes as Biden and his team displays no ability to explain how much money their initiatives will actually require, at a time when America's total debt has become gargantuan counting debts of governments, corporations; households, and financial institutions combined."

"Republicans are using the looming deadline as leverage against free-spending Biden and Obama Democrats to smoke them out in advance of the November 2022 elections," Ortel notes. "Democrats are crafty and would like to have political cover for their spending sprees that will seem more reasonable if they can attract support from likely turncoat Mitt Romney and Susan Collins, to suggest two potential weak links."

Meanwhile, for differing reasons Americans are losing faith that either established party can lead the country out of the present set of political and economic messes the nation must address, according to Ortel.

He believes that Trump-supporting Republicans, the so-called Blue Dog Coalition of conservative Democrats and centrist Independents "might find common cause in a powerful wave election in 2022" and thus outperform "wokester Democrats, hard-left Independents, and never Trump Republicans."