Possible US debt default minus one week

There’s still no debt limit deal with a week left until a possible default. Also covered: recent election results in Thailand, Greece and Northern Ireland councils.

11:09am The full text of the bill to raise the debt limit has now been released. This starts the 72-hour countdown to a vote on Thursday AEST. The House will return on Wednesday AEST. This deal raises the debt limit until after the 2024 presidential election, so if it passes there won’t be another hostage situation with the debt limit until after that election. That’s a win for Biden.

7:23am Monday As expected, Erdogan has won the Turkish presidential runoff election by a 52.1-47.9 margin. In the US, McCarthy is defending the debt ceiling deal against attacks from the right. The text of the bill has not yet been published.

12pm McCarthy said the text of the bill to raise the debt limit would be released tomorrow, with the House vote on Wednesday (Thursday AEST). But will far-right Republicans force a confidence vote in McCarthy? Under the rules he agreed to become Speaker in January, only one member needs to call for a confidence vote in the Speaker.

The US ABC news report says that one senator could potentially delay passage through the Senate for up to a week, so if it passes the House on May 31, it could still be delayed until past the June 5 deadline.

11:20am A tentative deal has now been reached between Biden and McCarthy. McCarthy will give a press conference soon.

10:53am Sunday Still no deal. It appears the biggest disagreement is over a Rep effort to expand work requirements for recipients of food stamps.

The Turkish presidential runoff is today, with polls closing at midnight AEST. Four late polls have Erdogan narrowly trailing, though others still have him ahead. But most polls were wrong in the first round, so Erdogan is still likely to win.

11:45am Saturday The US Treasury said last night that the earliest possible date of default was now June 5, not June 1. There are reports that a deal could be imminent, so the Dow was up 1.0% last night.

12:05pm Friday There’s no deal yet, but Biden and McCarthy both say there was progress in negotiations, so the Dow was only down 0.1% last night. The House has gone into recess, though members have been told to be ready to return if a deal is reached.

In polling news, Biden’s FiveThirtyEight ratings have dropped two points since Monday’s Conversation article to a net -12.4. Polls suggest roughly equal blame if a default occurs between Republicans and Biden. This Political Wire post says that in the 2011 and 2013 debt crises, far more people were blaming Republicans by this stage.

Guest post by Adrian Beaumont, who joins us from time to time to provide commentary on elections internationally. Adrian is a paid election analyst for The Conversation. His work for The Conversation can be found here, and his own website is here.

I covered the US debt limit for The Conversation on Monday. Republicans are demanding spending cuts in return for raising the debt limit that Democrats strongly oppose. As a weak economy in 2024 is likely to hurt Joe Biden, Republicans have an incentive to not compromise. Democrats could have avoided this crisis had they raised the debt limit before the House of Representatives changeover on January 3 this year.

The article also included discussion of national Republican primary polls (Donald Trump is way ahead of Ron DeSantis) and general election Biden vs Trump polls (Trump leads narrowly).

In developments since Monday, the US Treasury reiterated that default could occur as early as June 1, and likely in early June, without congressional action. Negotiations this week between Biden and Republican House Speaker Kevin McCarthy are still far from a deal. Stock markets are finally starting to notice the debt crisis, with the Dow Jones down for four straight days and down 0.8% last night.

In a national CNN poll released Wednesday AEST, 60% thought the debt limit should only be raised with spending cuts, 24% supported raising it no matter what and 15% didn’t want it raised at all. By 52-42, respondents in a national Marist poll thought spending cuts should be separated from raising the debt limit.

Left-wing Move Forward made big gains at Thai election

The Thai election was held on May 14. Of the 500 lower house seats, 400 were elected by First Past the Post (FPTP) and a further 100 by proportional representation (PR). The left-wing Move Forward won a total of 151 of the 500 seats (up 71 since 2019), beating the Pheu Thai party of former PM Thaksin Shinawatra, which won 141 seats (up five). The two royalist and military parties won a combined 65 seats (down 104).

If Move Forward and Pheu Thai form a coalition, they will have a combined 292 of the 500 seats, easily enough for a majority. However, the military appoints the 250 members of the upper house, and the PM is elected by a combined vote of both chambers. That means 376 votes out of 750 is needed to be PM.

Greek election: another disaster for polls and the left

At last Sunday’s Greek election, all 300 seats were elected by PR with a 3% threshold. The governing conservative New Democracy (ND) won 40.8% (up 0.9% since 2019), the left-wing Syriza 20.1% (down 11.5%), the centre-left PASOK 11.5% (up 3.4%), the Communists 7.2% (up 1.9%) and the far-right EL 4.5% (up 0.8%). Three parties just missed the 3% threshold.

At previous elections, there was a large seat bonus for the party winning the most votes, so seats won are not comparable. ND won 146 of the 300 seats, five short of the 151 needed for a majority. They could probably have formed a coalition with EL (16 seats), but have instead forced a new election on June 25 that will be held using a different form of the bonus seat system (as electoral changes made in the last parliament apply not at the next election, but at the following election). If using the bonus system, ND would easily win a majority.

Syriza performed about 10% worse than in pre-election polls, while ND did about 5% better. The left-wing MeRa25 had 4% in pre-election polls but missed the threshold. This poll failure followed the May 14 Turkish election, when most polls had the right-wing Erdoğan trailing in the first round (he led by 49.5-44.9 and is very likely to win Sunday’s runoff).

Sinn Féin wins most seats at Northern Ireland council elections

At the May 18 Northern Ireland council elections, held using PR with preferences, the left-wing Irish nationalist Sinn Féin won 144 of the 462 councillors (up 39 since 2019(, the conservative Democratic Unionist Party 122 (steady), the centrist Alliance 67 (up 14), the Ulster Unionists 54 (down 21) and the nationalist Social Democratic Labour Party 39 (down 20). This was the first time Sinn Féin was the largest party in NI local government, and the first time nationalist parties had more votes than unionist parties.

15 comments on “Possible US debt default minus one week”

  1. The debt ceiling is a concocted problem stemming from an entirely unnecessary procedure (involving Congress in approving non-discretionary federal spending). But even under the current ridiculous rules the President already has the authority to bypass the debt ceiling. He just needs to instruct the Treasury Department to issue Treasury notes instead of Treasury bonds. The bonds have a fixed maturity date and therefore add to the arbitrary construct known as the public debt. The notes don’t have a fixed maturity date because their principal is repayable “at the Treasury’s pleasure”, which means their principal does not technically get classified as adding to the public debt. Biden simply lacks the resolve to fulfil his responsibilities to the American people. He is a corporate Democrat, not a progressive Democrat. He agrees with Republicans on economic policy for the most part.

  2. Any particular reason the Democrats didn’t raise the debt limit at some point between midterms and the changeover (or, for that matter, earlier?). This bunfight seems fairly foreseeable, even for the people who didn’t have the foresight to enshrine pro-choice rights while they were in a position to do it lest a partisan USC ever overturn Roe v Wade…

  3. Over the last day or so Biden has issued a letter simply signed “Joe”

    It draws the battle lines and, in my opinion, correctly

    It is a powerful document calling out who and what it calls out

    In regards “debt”, I had a working career courtesy of debt

    Exclusively, because if there was no debt I did not have a job (well not that job and my 30 years in the workforce)

    Across that working life the assessment was not the level of debt but the performance of the asset that debt was invested into (the $ figure was just a figure because you could not relate to it as a person – the figures were that large)

    Noting that ALL Companies are funded by debt from Capital and Reserves (being Shareholder funds for which they receive a dividend), to Trade Creditors (being paid as and when due) and bankers (receiving interest and fees)

    Government invests in the good order of society including health and welfare, arts and sport, defence and infrastructure, the infrastructure spend providing for the needs of our future generations (plural)

    Government does not act under the covenants that business operates under, so Shareholder ownership (equity), liquidity, interest cover and the list can go on and on (the security also relying on a Charge over the assets and undertakings of the Company)

    The covenant government operate under is being on the Treasury benches, so the government (with their priorities)

    Governments (and Companies in the normal course) are perpetual, unlike human beings

    Hence, at the end of their working life, human beings look to be debt free

    Put the above in context of the letter simply signed “Joe”

  4. As Tony Abbott said “Sh*t happens”.

    And Australia has defined USA as our protector as per AUKUS deal.

    “House Speaker Kevin McCarthy appears set to send members home after votes on Thursday, signaling that debt negotiations with the White House will continue as the risk of a first-ever default grows.

    “While the speaker urged lawmakers to stay close to the nation’s capital over Memorial Day weekend, his top deputy, House Majority Leader Steve Scalise, announced that the House will recess following votes on Thursday as negotiators continue to work on a debt ceiling deal.”


  5. Debt default won’t happen, it’s just scarier sounding negotiating hyperbole than what will actually happen, which is that about half the public service will be sent home without pay until the issue is resolved. Some discretionary programs will also be suspended, such as food stamps.

    Both outcomes will be ones Republicans won’t generate a lot of energy worrying about.

    Inevitably, because public servants are also voters, once a debt ceiling increase is agreed that agreement will also ensure that all furloughed public servants receive back pay.

    In the interim, the media will be full of stories of public servants who can’t pay their mortgages, food stamp recipients forced into dumpster diving to feed their kids, foreign professionals who can’t get visas, and people who have to cancel their annual holiday because national parks and monuments are closed.

  6. AngoraFish, this is what happens in a government shutdown, which occurs when Congress can’t pass the budget. There was a long shutdown in early 2019 after Dems won the House and Trump and Pelosi disagreed. But in this case the govt is only partially shut down.

    If the US needed to use all tax receipts to service debt, there would be a complete govt shutdown. Virtually everything the govt does would stop immediately, such as social security payments. That would get ugly very quickly.

  7. I don’t understand why posters think that MAGAs are not capable of allowing US to default on their debt. They don’t understand the consequences of that and they don’t care about the consequences.
    MAGAs got elected to trash the joint and this is an opportunity to do so. They went home for holidays till June 5th. Whereas the Debt ceiling dead line is June 1st.

  8. I expect the public blame for this one is more even this time both because the Dems could have increased the debt ceiling while they controlled the House, and because the American people probably do expect some spending cuts.

  9. “American people probably do expect some spending cuts”

    Big statement (and you get many such big statements on this site!)

    What is the military spend and what is the percentage of military spend versus the social spend?

    So is the military budget to be cut?

    Or is it the social spend which is to be cut, impacting American people who probably expect some spending cuts?

    So, cut.

    As long as the cuts do not impact on me.

    Just for starters.

    Read the letter simply signed “Joe”

  10. The “public debt” of a currency-issuing government is not really debt in the ordinary meaning of the word. It is more accurately described as as the net financial wealth of the non-government sector, held in a particular form (securities account balances at a central bank, denominated in the currency-issuer’s currency). It doesn’t impose any burden on the currency-issuing government or on taxpayers. It is not a problem.

    Warren Mosler, Randall Wray, Bill Mitchell and others offer the most perceptive take on this topic.

  11. If I recall correctly, in 2019 the majority vote (so both parties noting the vote required in the Senate) was to suspend the debt ceiling

    In each of the other 3 years of Trump, the Democrats voted to increase citing “Trump’s debt”

    To me at least, it is noteworthy that the Republicans are demanding that there is no winding back of tax concessions but that the work requirements for low income earners reliant on government support are strengthened

    No doubt there needs to be audit of those in receipt of government (tax payer) support for purposes of integrity and viability

    But, equally, those in need of support should receive that support

    Just as, in regards tax, if you earn it you pay it

    And I will leave it there, noting PwC

    In regards Mosler, I would counter that his views are not publicly supported, confirmed by the handful of votes he has attracted across his various attempts at public office, including President

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