A heated debate is unfolding among American politicians and the public over House Speaker Kevin McCarthy's proposal to increase the debt ceiling by $1.5 trillion. Next week, he will have to defend his initiative at hearings in the House. Many of his colleagues in the Republican Party traditionally oppose raising the limit on the national debt and advocate for a reduction of government spending.
According to the renowned economist, both the Republicans and the Democrats serve the political will of corporations and the rich, i.e., business owners, who make up only two to three percent of the US population. The expert told Sputnik that entrepreneurs who lend money to the government and want interest paid control US economic policy, while the remaining 97% are left out of real decision making. "Billions and billions of dollars are going into the hands of corporations and the rich in interest because the government borrowed for them." Thus, the only way for corporate interests to be fulfilled is to increase the national debt ceiling so they can extract more profits, Wolff believes.
"The vast majority of the American people have no extra money to lend to the government, so they're not really relevant here. You know who has a lot of money? Corporations and the rich," the professor said.
According to the expert, another method is to increase the progressive tax rate for the rich closer to the scale it was 50-60 years ago – 91% tax, compared to today’s 37%. The raise in the tax rate for rich people to 39% proposed by the Biden administration appears to be a far cry from that, but even so, it is rejected by McCarthy's legislation.
"The reason corporations and the rich have the money the government needs to borrow is because the government didn't tax them that money away. But what we have is a government that is holding us hostage," Wolff noted.
However, Wolff believes the Republican opposition to McCarthy's proposal is insincere, given that both parties are beholden to corporations, which benefit from additional loans, as they mostly receive interest on them. The professor noted that the rich are also aware of the default risk and the consequences it could have, as the government is practically unable to pay the debt and corporations do not want to lose money.
Earlier this month, the US Treasury warned that "extraordinary" measures that are being taken to keep paying the debt will last only until the summer and after that, the US could default on its debt, triggering an economic crisis.
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