Whether the US government defaults in June may now depend on the whims of the House Freedom Caucus

(Originally published Jan. 20 in “What in the World“) The Administration of U.S. President Joe Biden now faces the prospect of a fiscal crisis this summer after the U.S. Government on Thursday reached its legislated ceiling for debt of $31.4 trillion.

At the very least, Biden must now negotiate with Republicans controlling the U.S. House of Representatives who are demanding spending cuts and who, in the wake of their election for a new Speaker, are under the control of their own right-wing minority. In the meantime, the Treasury Dept. has begun shuffling money between areas of the government to avoid defaulting on bills and repayments of bonds and the interest due. Treasury Secretary Janet Yellen has warned the House that these “extraordinary measures” will work only until about June 5—maybe. Then the government will run out of money.

Washington isn’t just one of the world’s largest borrowers. With a budget of $6.27 trillion last year, it is one of the world’s biggest spenders. The very prospect, therefore, that the U.S. Congress might simply force the government out of business and into defaulting on debts coming due is roiling financial markets. A government shutdown not only increases the likelihood of a U.S. recession, but also raises the risk of a global recession. It also up-ends global credit markets by throwing into doubt the creditworthiness of U.S. Treasury bonds, which global investors treat as the world’s safest debt and against which almost all other debt is effectively priced.

Partisan standoffs over the debt ceiling have become an annual drama so regular that investors tend to shrug it off. One party, usually the fiscally conservative Republicans, threatens to bring the government to a halt until the fiscally liberal Democrats agree to some spending concessions, and catastrophe is averted at the eleventh hour. Ho-hum.

But sometimes the politicians miscalculate. In 2011, Congress raised the debt ceiling just two days before the government ran out of cash, but not before sparking major market turmoil that prompted credit-rating agency to downgrade Washington’s AAA rating, declaring in effect that the emperor indeed has no clothes, and that the U.S. isn’t the safest borrower around after all.

The most worrisome problem this time around is that Republicans don’t yet know what cuts they want. House Speaker Kevin McCarthy had to promise to push for spending cuts in his desperate bid to placate supporters of former President Donald Trump and his bid to overturn the 2020 election, but there’s still no list of demands. That’s going to make negotiations to end the impasse and keep the government going a bit tricky. The fate of the global economy may now reside with the zaniest troupe of right-wing legislators in the House, the Freedom Caucus.

Three of the greatest advantages social-media platforms have had over traditional media outlets are that a) their users are all essentially guerilla journalists, posting what news they see or what news they read to people they know are interested; b) they haven’t had to pay for content from traditional media outlets that their users post, giving them essentially free news content; and c) they haven’t been held responsible for the content their users post.

While governments elsewhere around the world have started to hold the likes of Google’s YouTube and Meta’s Facebook and Instagram responsible for what users post, they’ve continued to enjoy carte blanche in the United States.

Next month the U.S. Supreme Court will consider a challenge to that. Specifically, the Court will hear a case challenging Section 230 of the Communications Decency Act, which protects online platforms from lawsuits against content posted by their users. Gonzalez v. Google argues that content posted by users becomes the platforms content once its own algorithms recommend that content to other users based on its assessments of their interests.