United States Bankruptcy: ‘It Shouldn’t Happen’

For weeks, American politics has been under an imminent bankruptcy. America’s debts are so high that a default is imminent. In sheer desperation, policymakers are trying to raise the debt ceiling, but analysts still expect the U.S. to default in June, meaning the country will default on its debts.

BlackRock Vice President Philipp Hildebrand expects that if the US is classified as a defaulter, it will have major consequences for the international financial system. “It’s not something you want to mess with,” he cautions. Hildebrandt, a former head of the Swiss central bank, believes the problem will be resolved in time. He argues that if the US does not repay creditors, it is an “anchor” that threatens the financial system. “That won’t happen.”

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Republicans want to get rid of Biden’s hobby horses

So US President Joe Biden wants to raise the debt ceiling. Republicans simply don’t want to participate. So they demand changes in the budget. House Speaker and Republican Party leader Kevin McCarthy presented a plan that proposed $130 billion in cuts. On the other hand, the debt ceiling will be raised by one and a half trillion dollars.

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Republicans especially want to cut back on programs where Biden wants to profile himself. It includes climate projects, health care and the Inflation Act Conservative politicians want to cut spending. Republicans want to scrap a plan to cancel a large portion of US student debt. However, the White House is critical of the plans, saying House Republicans are “holding the American economy hostage.”

Big consequences

However, US Treasury Secretary Janet Yellen wants “severe measures” to be taken by early June to stave off bankruptcy. The debt ceiling currently stands at $31.4 trillion. However, the US had already tapped that amount in January, but a fiscal trick helped build a buffer of US$800 billion. However, the Americans cannot repeat that trick. This summer, the US will still hit the ceiling. As a result, the US can no longer pay interest on outstanding debts, for example. Also, government officials can no longer spend money on health and social services.