There is a dangerous game that I believe many people are not unfamiliar with.
In the game, two drivers drive opposite each other. If two people refuse to turn and let the two cars collide, both will eventually die in a car accident; but if one side turns and the other does not, then the turning party will be ridiculed as a "chicken" and the other side will win.
The game was thus called "the game of chicken", and the name was later widely used in political science and economics, becoming the classic model of two players fighting each other in game theory:
A player's concession is good for both sides, and the player's best choice depends on what his opponent will do – if the opponent gives in, then the opponent should not give in, but if the opponent does not give in, the opponent should give in. In short, it is "the biggest thing to die for".
In the eyes of many people, the two parties in the United States are currently in such a dangerous "game".
On September 21, the Democratic-dominated House of Representatives passed a bill to fund the government until December 3, 2021, while deferring the debt ceiling to December 16, 2022 (after The Day of the Midterm Elections on November 8). Of those, 220 Democrats voted in favor and 211 Republicans voted against.
The background of this bill is that every October, the beginning of the new fiscal year of the U.S. government either requires a new spending bill (usually the spending bill does not last throughout the fiscal year) or an ongoing resolution to keep the government running. Otherwise the federal government will have to shut down because it has no power to spend.
The bill is supported by Democratic leadership, including Biden. However, the Senate must vote on it before Biden can sign it into law. This is expected to happen later this week or early next week.
If the Senate does not pass, the U.S. government will still partially shut down on October 1. Meanwhile, the U.S. debt ceiling reverted on Aug. 1 of this year, and the U.S. Treasury department is taking "unconventional measures" to help the federal government continue to meet its obligations, but U.S. Treasury Secretary Janet Yellen warned on Monday that if the debt ceiling is not raised, the federal government will exhaust "unconventional measures" sometime in October and will not be able to pay its bills.
That said, the U.S. Congress now has less than a week to prevent a government shutdown and a maximum of 5 weeks to avoid a government default.
However, the key now is that the Democrats will unanimously oppose the Republican party to "bind" the suspension of the US debt ceiling in this bill, which is equivalent to both prosperity and loss, and if the Senate does not pass this spending bill, it means that the US government is likely to shut down, and the possibility of US government default will be further approached.
The possibility of short-term Treasury markets reflecting this is growing, and on Thursday the White House began advising federal agencies to prepare for the first COVID-19-era shutdown.
But in reality, the current impasse, which could lead to a U.S. government shutdown and default, is entirely avoidable. Democrats could have chosen to raise the debt ceiling through a settlement process that didn't require a vote from any Republicans.
The main reason why the Democratic leadership seeks Republican support is that adopting a settlement process to raise the debt ceiling could be detrimental to Democrats in the 2022 midterm elections, preferring to share responsibility with the Republican Party and force the Republican Party to support a moratorium on the debt ceiling.
In other words, Democrats have set up a "coward's game" on the suspension of the debt ceiling, and if neither party budges, the U.S. faces a government shutdown and default.
Republicans have said they won't raise the debt ceiling because Democrats are trying to adopt a settlement process to pass a $3.5 trillion spending package and passed a $1.9 trillion U.S. bailout package earlier this year without any Republican vote.
Wall Street Insights previously mentioned that raising or suspending the debt ceiling would not authorize new federal spending, but would allow the Treasury To pay for legislation already passed by lawmakers.
While this democratic risky move seems to make it difficult for Republicans to vote for a veto, republicans have good reason to refuse to budge this time, after all, Democrats have the ability to raise the debt ceiling and pass a new spending bill through a settlement process without any Republican votes, so it is difficult for voters to blame Republicans for government shutdowns or even defaults.
Maybe the mainstream media may try to do so, but conservative media related to Republican voters will explain it differently. In fact, Senate Republican leader Mitch McConnell has said he would support a spending bill with a "no debt limit suspension."
So, there is no need for the Republican Party to hesitate. As long as they have the will, they can win the "game" and eventually force Democrats to pass their package of spending bills alone. What's more, if Democrats are unable to come together under pressure, Biden's ambitious legislative agenda could collapse in October.
Democrats are now preparing to adopt a conciliatory process to advance the $3.5 trillion health, education and climate stimulus package, bypass the 60-vote threshold required for most Senate bills, and push for a "bundled" vote on the trillion-dollar infrastructure bill and the $3.5 trillion package next week.
But because of disagreements over the $3.5 trillion bill, the "bundled" vote has plunged the Democratic Party into a political tug-of-war.
There is also the debt ceiling, which, if Republicans do not compromise, will have to decide whether to shut down the government and risk default, or raise the debt ceiling through a settlement process.
By then, the Democratic plan is likely to backfire and will have to raise the debt ceiling through a settlement process. Divisions within the Democratic Party are likely to eventually lead to a significant reduction in the $3.5 trillion budget figure.
So, if the U.S. government shuts down or even defaults, it's entirely self-inflicted.
And this time, at first glance, the Republican Party seems to be repeating the same tactics, using the debt ceiling to undermine Democratic policy and jeopardize the sovereign debt credit of the U.S. government. However, this is not the Tea Party blocking a repeat of the Obama administration. This time, Democrats are deliberately seeking a confrontation they can easily avoid.
Goldman Sachs therefore warned in a recent report that this time the US debt ceiling battle is as risky as in 2011, when the US debt technical default. And expects that, to win the necessary support, Democratic leaders will scale back their proposed $3.5 trillion settlement bill over the next decade to closer to $2.5 trillion in new spending, funded by about $1.5 trillion in new taxes.
At a meeting within the Democratic Party this week, lawmakers discussed reducing the size of the package to less than $3 trillion, the Wall Street Journal reported. But some moderate Democrats are demanding lower figures.
Either way, democrats will be very busy next week, voting on two unprecedented stimulus bills at the same time and pushing the Senate to vote on a funding bill that bundles the debt ceiling.
This article is from Wall Street Insights, welcome to download the app to see more