(Bloomberg) — The U.S. is heading to the precipice of a debt default as much for the sake of campaign ads and political branding as fiscal philosophy.
While agreeing that the statutory limit on U.S. borrowing must be raised before it’s breached sometime next month, Republicans and Democrats are completely at odds over who should act.
Senate GOP leader Mitch McConnell argues that Democrats alone are responsible since they are pursuing a partisan multi-trillion dollar tax and spending plan. The Senate’s top Democrat, Chuck Schumer, accuses Republicans of trying to “dine and dash” on the cost of their 2017 tax cuts and wants their fingerprints on the vote to raise the debt ceiling.
The debt limit fight has become part of an ongoing struggle between the parties to shape public perceptions of President Joe Biden’s agenda heading into next years congressional election.
For Republicans, it puts the focus on the overall cost of Biden’s economic plan, rather than popular components like paid family leave and an expanded child tax credit. And it ties Biden to the rising national debt, never mind the ballooning deficits under former President Donald Trump.
That prepares ground for the kind of traditional Republican campaign against tax-and-spend liberalism that McConnell is trying to steer his party toward instead of centering the midterm election on cultural issues and Trump’s false charges about election fraud.
At its most basic level, McConnell’s bid to force a Democrats-only vote to raise the limit gives the GOP ready ammunition for campaigning.
“It’s another line in the attack ad,” said Michael Steel, who was then-Republican House Speaker John Boehner’s press secretary during the 2011 fight over raising the debt limit. “Increasing the debt limit is a terribly unpopular vote.”
Many lawmakers make little effort to cloak their political motives. Republican Senator Rick Scott, who heads the Senate GOP’s campaign committee, said he expects Democrats’ votes in favor of raising the debt ceiling will feature prominently in the 2022 election.
“Oh yeah, you’re going to hear about it a lot,” Scott said.
Senator Joni Ernst, an Iowa Republican, said the party-line debt limit vote will “absolutely” help crystalize the case that Democrats’ spending is out of control. “It will be very effective in Iowa.”
Democrats are already heading into a challenging midterm campaign, particularly in the House, where the party has a slim majority, Democratic-leaning states are losing seats to Republican ones in the Census reapportionment, and the president’s party typically loses members during midterm elections. Control of the 50-50 Senate also is in play.
“It’s total political rhetoric, drama,” Michigan Democratic Representative Debbie Dingell said. “We shouldn’t be playing political games the way we are.”
Democratic leaders have primarily responded by casting the GOP as reckless with the economy in their readiness to risk a debt default as well as their actions when they controlled the White House and Congress.
The total U.S. debt rose from $19.8 trillion, or 104% of gross domestic product, when Trump took office in 2017 to $28.1 trillion, or 128% of GDP when he left in 2021. The $8.3 trillion increase during Trump’s single term is almost as much as the $10.6 trillion rise during Barack Obama’s two terms.
Democrats claim their $3.5 trillion economic program won’t add to deficits because it will be paid for with tax increases on corporations and the wealthy, though they haven’t finished negotiating a final version and the independent Congressional Budget Office hasn’t yet made a projection. A separate bipartisan infrastructure package backed by Biden would add $256 billion to the national debt over the next decade, the CBO estimated.
Democrats voted with Republicans three times during the Trump presidency to raise or suspend the debt limit to avoid default, despite opposing the 2017 Republican tax cuts that added to the debt.
This time, McConnell is insisting Democrats use a process called reconciliation to pass the debt limit increase in the Senate without Republican votes. Democrats so far have refused. They instead added the debt limit increase to stopgap legislation to avert an Oct. 1 government shutdown and fund disaster aid, daring Republicans to oppose the measure. The legislation passed the House, but Republicans have vowed to block the measure in the Senate when a procedural vote is taken as soon as Monday.
So far, Democratic efforts to blame Republicans for the stand-off haven’t worked. Asked which party would be more to blame if the U.S. defaulted, 33% of Americans said Democrats, 42% both parties, and only 16% Republicans, according to a Morning Consult/Politico poll taken Sept. 18-20.
The stability of global financial markets and strength of U.S. economic growth once again are on the line in the resulting game of chicken.
Mark Zandi, chief economist at Moody’s Analytics, warned in a note to clients that even a short default would raise borrowing costs to U.S. taxpayers for decades. A prolonged default on U.S. debts would cost the country 6 million jobs, drive down U.S. stock prices by a third and wipe out $15 trillion in household wealth, Moody’s predicts.
Even without a default, brinksmanship over the debt limit between Republicans and the Obama administration in 2011 provoked the first-ever downgrade in the U.S. sovereign credit rating and contributed to a stock-market slide.
The political payoff for the risk is nebulous.
Republican pollster Whit Ayres, a 30-year campaign veteran, can’t think of a single election in which a debt limit vote played a decisive role.
“There may be some campaign out there that someone can point to,” Ayres said, “I can’t come up with one.”
Jim Kessler, executive vice president for policy at Third Way, a think tank aligned with the Democratic party’s moderate wing, also argues there’s “more bark than bite” in established political wisdom that votes to raise the debt limit are perilous.
Even so, many moderate Democratic lawmakers represent closely divided constituencies and aren’t anxious to add to their political risks. Public feeling on government debt can be potent.
“American voters’ sensitivity to debt and deficits shows up episodically, but when it shows up it shows up with a vengeance,” Kessler said, citing the Tea Party movement that began in 2009 and helped provide energy for the Republican resurgence in the 2010 midterm elections.
Pete Brodnitz, a Democratic pollster who has worked for party leaders’ House Majority super-PAC in battleground races every election the past decade, said the midterm results will hinge on what the public believes about the party’s economic strategy. And that is the critical battle beneath the surface.
“An economic narrative is critical,” Brodnitz said. “If the economy gets better, Democrats won’t be helped unless there is a Democratic strategy people associate with it.”
The debt limit fight is playing out just as Congress debates the spending packages that will enact the Biden agenda and voters are forming impressions of the plan.
“They want the narrative to be the Democrats just want to spend,” Brodnitz said. “We need the narrative to be we’re trying to invest in our future, and the Republicans are trying to stand in the way.”
©2021 Bloomberg L.P.
Tigray forces say air strikes hit Ethiopia’s Mekelle, government denies
Rebellious Tigrayan forces accused the Ethiopian government of launching air strikes on the capital of Tigray region on Monday, though the government denied the reports.
The reported attack follows intensified fighting in two other Ethiopian regions, where the central government’s military is trying to recover territory taken by the northern province’s Tigray Peoples Liberation Front(TPLF).
Tigrai TV, controlled by the TPLF, said the attack on the city of Mekelle killed three civilians.
A resident of the city told Reuters one strike hit close to a market, behind a hotel. An aid worker and a doctor in the region also said there had been an attack and a diplomat shared pictures of what they said was the aftermath, including pools of blood and smashed windows.
All asked not to be named. Reuters could not confirm the authenticity of the images.
Ethiopia’s government spokesman, Legesse Tulu, denied launching any attack. “Why would the Ethiopian government attack its own city? Mekelle is an Ethiopian city,” he said.
“Terrorists are the ones who attack cities with innocent civilians in them, not government,” Legesse added. He accused the TPLF of killing civilians in fighting in neighbouring regions.
Reuters was not able to verify any of the accounts in an area that is off-limits to journalists.
“I WAS A FEW METRES AWAY”
War erupted in Tigray almost a year ago between the Ethiopian military and the TPLF, the political party that controls the region, killing thousands of people and forcing more than two million to flee.
Tigrayan forces were initially beaten back, but recaptured most of the region in July and pushed into the neighbouring Amhara and Afar regions, displacing hundreds of thousands more.
A week ago, the Tigrayan forces said the military had launched a ground offensive to push them out of Amhara. The military acknowledged on Thursday there was heavy fighting there, but accused the Tigrayan forces of starting it.
Reporting details of Monday’s air attack, Tigray TV said the first strike hit the city’s outskirts, near a cement factory, while the second struck in the city centre.
A doctor in the region said they heard the first attack on Monday morning. “First I heard the sounds of jet and also an explosion from afar,” the doctor told Reuters?
“Then in the afternoon there was another sound, which seemed closer. This one seemed like it happened inside the city,” the doctor said.
A Mekelle resident told Reuters that around noon, (0900 GMT), a strike hit close to a market behind the city’s Planet Hotel, in the city centre.
“I was a few metres away, I thought they had hit our compound,” the resident said.
TPLF spokesperson Getachew Reda tweeted: “#AbiyAhmed’s ‘Air Force’ sent its bomber jet to attack civilian targets in& outside #Mekelle,” referring to Ethiopia’s Prime Minister Abiy Ahmed.
Diplomats are worried that renewed fighting will further destabilise Ethiopia, a nation of 109 million people, and deepen hunger in Tigray and the surrounding regions.
(Reporting by Addis Ababa newsroom; Additional reporting and writing by Nairobi newsroom; Editing by Alison Williams, Andrew Heavens, William Maclean)
What's ON: The week ahead in Ontario politics (October 18-22) – TVO
Every Monday, TVO.org provides a primer on what to look for in the coming week in Ontario politics, and features some stories making news now.
Here’s what we’ve got our eye on:
Queen’s Park Keywords
They’re back – again: MPPs return to the legislature today after a one-week break.
Gag on grassroots(?): Minister of Municipal Affairs and Housing Steve Clark has been accused of using Ontario’s election finance laws to silence three grassroots organizations. The Toronto Star says Clark filed complaints with Elections Ontario, alleging the groups were “conducting unregistered third-party political advertising.” Two of the groups are protesting a proposed prison in Clark’s riding. The other is the Peaceful Parks Coalition, which describes itself as a volunteer group trying to ensure Ontario’s wildlife and wild spaces are protected. A spokesperson for Clark said the minister has received complaints from constituents about third-party political activities in his riding. The Star reports that Elections Ontario did find the Peaceful Parks Coalition were violating election finance laws, while the complaint against the two groups protesting the prison was found to be without merit.
Our journalism depends on you.
You can count on TVO to cover the stories others don’t—to fill the gaps in the ever-changing media landscape. But we can’t do this without you.
Four-day work week: Liberal Leader Steven Del Duca has pledged that if his party wins power in the next provincial election, his government will explore the idea of implementing a four-day work week in Ontario. Under such a system, employees would work the same number of hours, but over four days instead of five. “I want us to understand if it has merit here,” Del Duca said during a speech at the party’s annual general meeting on Sunday. “We’re a party that believes in science, expertise and evidence-based decision-making and so I want us to gather the facts in an open and transparent way.” Del Duca also promised to replace Ontario’s first-past-the-post voting system with ranked ballots.
Winning the lottery: An internal government audit has found salaries and spending are out of whack at Ontario Lottery and Gaming Corporation. For example, from 2015 to 2018, some OLG executives received raises of between 16 to 46 per cent, compared to raises of three to 10 per cent at other government-owned corporations. Also, the audit looked at a sample of items charged to corporate credit cards. It found 29 per cent of them did not comply with OLG’s corporate credit card policy, and the purchases should have been made by other means. In a statement to the Toronto Star, OLG said the credit card charges “were found to be legitimate work-related expenses,” and that a third-party review determined the salary increases fell within market rates for the broader public sector.
Order of business
Here is some of what the legislature is scheduled to discuss this week:
- Monday: It is the first opposition day of the fall session, where the opposition parties get to set that day’s agenda. The NDP plans to put forward a motion calling on the government “to place an indefinite moratorium on the issuing of new licences and the renewal of licences of for-profit long-term care providers and prioritize the development of not-for-profit long-term care in Ontario.” There will also be debate on Bill 5, The York Region Wastewater Act. (TVO.org’s John Michael McGrath actually wrote an article about this bill and why it matters).
- Tuesday: The speech from the throne, delivered on Oct. 4, will be debated in the morning. In the afternoon, debate on the throne speech will continue, and NDP MPP Suze Morrison (Toronto Centre) intends to submit a private member’s bill. What that bill will be about was still to be determined when the legislature last sat on Oct. 7.
- Wednesday: Debate on the throne speech will continue, and Liberal MPP John Fraser (Ottawa South) will introduce a private member’s bill. “I’m not sure which one it will be,” Government House Leader Paul Calandra told the legislature on Oct. 7. “I know he might have more than one, but I’m sure he’ll give us notice.”
- Thursday: There will be debate on government notice of motion number 3, which proposes a tweak to the legislature’s debate schedule. There will also be a private member’s bill from NDP MPP Laura Mae Lindo (Kitchener Centre). “Of course, that one still is yet to be determined as well,” Calandra said.
Beyond the Pink Palace
Lower case counts: Ontario logged fewer than 500 new COVID-19 cases for the seventh straight day on Sunday. The province’s seven-day average of new daily COVID-19 cases is about 428, compared to an average of 524 a week earlier.
Pandemic supports: While several federal programs to help people and businesses through the pandemic are scheduled to end later this week, there is talk they could be temporarily extended. Federal finance minister Chrystia Freeland said in an interview aired on Saturday by the CBC that she is currently consulting with economists, business and labour groups, her department and Prime Minister Justin Trudeau on what should become of the programs.
Upcoming coverage on TVO
This week’s episodes of The Agenda include a discussion on Monday about what tenants can expect when the temporary province-wide rent freeze designed to help renters during the pandemic ends on December 31st. And on Tuesday, the program will offer insights into how the provincial parties are gearing up for the 2022 Ontario election. The Agenda airs weeknights on TVO at 8 p.m. and 11 p.m.
Some of what you can expect on TVO.org this week includes a rebuttal column to an opinion piece we ran earlier that argued the province should consider putting on hold plans to expand Toronto’s subway system. Also watch for new articles by our regular columnists, John Michael McGrath and Matt Gurney, and of course the #onpoli podcast, which publishes Tuesday.
With files from John Michael McGrath.
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