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Donald Trump in the White House: At 34 days, he holds the sad record for the longest shutdown of the US government (2018/19)
Photo: BRENDAN SMIALOWSKI/ AFP
US Treasury Secretary Janet Yellen is sounding the alarm because the state is threatened with insolvency: On Thursday, the government in Washington is likely to have reached the so-called debt limit - the "debt ceiling".
After that, the government is no longer allowed to take out loans: it would probably run out of money at the beginning of June.
Until then, the Ministry of Finance can still take "extraordinary measures" to continue to guarantee the government's solvency through accounting methods.
In a letter to the party leaders of both houses of parliament, Yellen writes that it is "crucial that Congress acts in good time to raise or suspend the debt ceiling".
It is currently around 31.4 trillion US dollars, the equivalent of around 29 trillion euros.
Yellen warned that a default would cause "irreparable damage" to the US economy, the livelihoods of US citizens and the stability of the global financial system.
In the past, the prospect of an impending payment default had had real consequences.
Is McCarthy strong enough to reach an agreement?
Statements by leading Republicans in the US House of Representatives had recently fueled concern that there could be a showdown between the two major parties.
Because since the beginning of January, the Republicans in the House of Representatives have had a wafer-thin majority with which they could prevent the debt limit from being raised.
Observers believe that the new House Speaker, Kevin McCarthy, will find it difficult to get a majority in his own party to raise the debt limit or reach an agreement with the Democrats.
At the beginning of January, McCarthy had great difficulties even being elected speaker by the hardliners in his Republican majority – he needed 15 ballots for this.
"We need to change the wasteful way this country spends money, and we're going to make sure that happens," McCarthy said on Thursday, calling on Democrats to approve budget cuts.
The debt limit has existed since 1917
But what would a failure to raise the debt ceiling mean anyway – and how have major struggles over government spending ended in the past?
The debt ceiling was introduced in 1917. The »Second Liberty Bond Act« gave the government the right to take out loans up to a certain limit – without these being tied to a specific project.
Previously, Congress had to approve every single loan.
The reason for the new regulation was the financing of US participation in the First World War, which could be designed more flexibly.
Since refinements in 1939 and 1941, the US government has been able to decide when to borrow to finance expenditure.
However, a strict debt ceiling was always set.
Once this has been achieved, the government can no longer borrow money and thus no longer spend – at least once it has used up its available funds.
There is a risk of default with potentially catastrophic economic consequences.
A similar showdown over government spending has often taken place in the past in the event of a so-called “government shutdown”.
This occurs when the US Congress fails to pass a new state budget by law.
As a result, government business came to a partial standstill.
Public servants sometimes have to be placed on compulsory leave or work temporarily without pay.
Government services are restricted or payments are delayed.
In the past 20 years, there have been repeated arguments about raising the debt limit and four times there have even been shutdowns.
Sometimes such a thing could just about be averted.
In
2011
, the US government narrowly avoided bankruptcy.
After tough negotiations, the debt limit was raised, but the Obama administration promised savings, including in the military.
The dispute at the time had another negative effect: the newly elected Republican majority in Congress delayed raising the debt ceiling for so long that the US credit rating was downgraded for the only time in history.
Then, in
2013
, it shut down.
The Republicans wanted to tie further government funding to a postponement of Obama's health care reform, the Democrats refused - and as of October 1, the government was partially paralyzed.
The shutdown lasted 16 days, then the Republican Speaker of the House of Representatives, John Boehner, gave in and national bankruptcy was averted.
The debt ceiling was raised and an interim budget passed.
Economists estimate the economic damage at at least 24 billion dollars.
In
2018
, there were three shutdowns under President Donald Trump.
From
January 20 to 23,
the government was paralyzed for three days: the Democrats would not agree to a budget compromise without pledges to protect around 700,000 immigrants who had entered the country illegally as minors.
Trump, meanwhile, asked for funds to build a border wall with Mexico.
After three days, the Republicans offered the Democrats protection for the so-called "dreamers," but the fundamental problem was only postponed.
On February
9, 2018
, the two parties had actually agreed on a two-year budget package that included higher spending on defense, investments in civil protection infrastructure and the fight against drug abuse.
But then Republican Rand Paul of Kentucky gave an hour-long speech in the Senate to block the vote.
There was a shutdown, but it was lifted again after a few hours.
In
December 2018
Then the dispute over a prestige project by Donald Trump, the construction of the border wall with Mexico, escalated.
Over the summer, the US President had threatened not to approve any budget that did not also provide for the construction of the Wall.
His Republicans finally wanted to grant him the money, the Democrats refused, so there was another shutdown on December 22, of which Trump even seemed proud.
Negotiations also came to no conclusion because of Trump's stubbornness. On January 12, 2019, Trump surpassed Bill Clinton's previous 21-day shutdown record from 1995/96.
On January 25, the parties agreed on an interim solution to enable the government to function again.
A bipartisan negotiating team later purred the $5.7 billion Trump demanded for border security to 1,
$375 billion combined.
Read an overview of shutdowns until 2019 here.
In
2021
, shutdown and default were narrowly
averted
.
In October, the USA would have run out of money, the state was threatened with insolvency – with serious consequences for the economy around the world.
The background was a power game between Democrats and Republicans.
Neither party wanted to be held accountable to the electorate for the fact that the USA once again increased its statutory debt limit.
Republicans did not want to pass up the opportunity to brand the Biden administration as an unsound spendthrift.
With a $480 billion injection, the US finally averted the default just in time.
And
2023
?
The chances of an agreement this year are slim because the radicals are particularly strong in the Republican ranks and it is politically dangerous for Republican lawmakers to agree to an increase in the debt limit.
A solution might be conceivable in which the Democrats in the House of Representatives vote in favor of an increase – and are supported by a few Republicans.
It is now also in the hands of the new spokesman Kevin McCarthy whether this will succeed.
mgo/dpa