Explainer: America will drown if there is no solution in 10 days, why is the world standing on the verge of destruction?


Explainer : 10 दिन में नहीं हुआ सॉल्यूशन तो डूब जाएगा अमेरिका, क्यों तबाही के कगाार पर खड़ी है दुनिया?

Two days ago, the figures of Germany showed that recession has come. You should understand the meaning of recession in the world’s fourth largest economy. Neither London is far away nor Berlin nor Rome. Now the closest one is New York. Yes, recession can enter in New York after June 5. The reason for this is the non-availability of a solution to the American debt ceiling. If the US does not find a solution before June 1, or rather, if the US government does not increase the debt limit, then the world’s largest economy will be in the grip of recession. After that such a chapter will be added in American history which will be black not only for American economy but for the whole world.

Only in America 83 lakh jobs will be lost and in the whole world this figure will reach in crores. American GDP will sink by more than 6 percent, in such a situation, what will be the fate of the global economy, its estimate can also create a headache inside you. So has the countdown to the sinking of the American economy begun, from which there is no chance for anyone to escape? Or by June 5, the government will take some such decisions so that along with America, the world’s economy can also be saved. Because the current situation has become so bad that President Joe Biden has had to cancel his foreign tour. Cash in hand is not even $ 55 billion. Interest of about one and a half billion dollars has to be paid daily. Come, today there is a need to open and read those economic pages of America, due to which the world’s largest economy has become like this.

But before that, understand today’s warning by US Treasury Secretary Janet Yellen, which she has given through a letter to the speaker of the US Congress. If America does not increase the debt limit till June 5, then there will be a big economic and financial storm in America. America will become the defaulter for the first time. Federal employees will be furloughed, global stock markets will crash and the US economy will probably enter a recession. So it is up to everyone to understand and it is up to everyone to take care, because apart from America, all the countries of the world which have economic relations with America will come under its grip.

Is there really a debt ceiling?

The debt ceiling is the limit on the amount that the US government can borrow to pay for services such as Social Security, Medicare and the military. Every year the government generates revenue from taxes and other streams, such as custom duty, but spends much more than it takes in. Because of which the government comes into deficit, ranging from $ 400 billion to $ 3 trillion every year for the past decade. The remaining deficit at the end of the year is added to the total debt of the country.

To borrow money, the US Treasury issues securities such as government bonds, which are eventually paid back with interest. Once the US government reaches its debt limit, the Treasury cannot issue more securities, which blocks the flow of money to the federal government. The US Congress sets the debt limit, which currently stands at $31.4 trillion. Since 1960, the debt limit has been increased 78 times. The last time this date limit was extended in the year 2021.

Us Default

What if America defaults?

America has never defaulted on its payments before. So what exactly will happen is not clear, but it is certain that its results are not going to be good. US Treasury Secretary Janet Yellen said in a letter to Congress in January that if Asar failed to make the payment, the US economy, the livelihoods of all Americans and global financial stability would be greatly damaged. Investors will lose faith in the US dollar, due to which the economy will weaken rapidly. There will be job cuts. The US federal government will not have the means to continue with all its services. Interest rates will increase and the housing market will be destroyed.

US Recession

Why is America in debt so high?

American debt increases when the government is spending more money or when its revenue is less. Throughout its history, America has had at least some amount of debt. But after Ronald Reagan’s massive tax cuts in the 80s, America’s debt actually began to grow. In the absence of high tax revenue, the government had to borrow more and more money to spend.

During the 90s, after the end of the Cold War, the government cut down on defense expenditure. Due to the booming economy, there was an increase in tax revenue. Then, in the early 2000s, the dotcom bubble burst, sending the US into a recession. George W. Bush passed tax cuts twice, in 2001 and 2003, and then US military operations in Iraq and Afghanistan boosted spending during the war to nearly $6 trillion.

When the Great Depression of 2008 began, the government had to spend to bail out banks and increase social services as the unemployment rate reached 10 percent. In 2017, Donald Trump’s administration passed a major tax cut when the unemployment rate returned to its pre-recession level. During his tenure, the US debt increased by $7.8 trillion. After that the period of Kovid 19 epidemic started. The US government announced a $5 trillion relief package to address the worst effects of the pandemic.

Us Expenditure

Where does the government spend the most?

The largest portion of US government spending is on mandatory programs such as Social Security, Medicaid, and Medicare, which comprise about half of the total annual budget. Military expenditure takes up 12 per cent of the budget. Apart from this, education, employment training and services and and the benefit of American Veterans are spent.

Us Debt And Congress

Why is Congress not increasing the debt limit?

On April 26, Republicans passed a bill in the House that would raise the debt limit by $1.5 trillion but mandate $4.8 trillion in spending cuts over a decade. Because of which the Democrats have refused to negotiate for spending cuts on the debt limit. Lawmakers including Alexandria Ocasio Cortez have argued that Republicans should be talking about spending cuts during budget negotiations, not the debt limit.

Still, Republicans are sticking to their word, pressuring Democrats to agree to spending cuts and for the first time trying to sway Democrats by resorting to the unspoken threat of defaulting. He adopted this maneuver in the year 2011 as well, in which he also became successful. When the Democrats agreed to cut spending 72 hours before the government defaulted. This time this deadlock does not end and the government is also not ready to bow down, then the American economy can be brought very close to the disaster.

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