The US House of Representatives’ historic decision to impeach its Republican Speaker Kevin McCarthy on Tuesday raised questions about the extent of the impact on the US economy and the fate of aid to Ukraine.
How will the US economy be affected?
Network Report”CNNThe wrangling between lawmakers in Washington has become “severe” and is expected to have consequences, including another downgrade of the credit rating, which could cause severe damage to the US economy.
Over the summer, the bipartisan dispute led to the United States defaulting on its debts for the first time since the nation’s founding nearly 250 years ago. Then over the weekend, the government avoided a shutdown thanks to a deal McCarthy struck with Democrats, according to the network.
The network expected Moody’s Investors Services, one of the three major credit rating agencies to assign the highest rating to US debt, which is AAA, to not overlook what is happening in the corridors of US politics.
The network reported last week that Moody’s warned that a government shutdown could prompt a downgrade of the U.S. credit rating.
CNN explained, “This will increase the pressures facing the U.S. economy, and may even increase the possibility of a recession.”
“While the government’s debt service payments will not be affected and a short-term shutdown is unlikely to disrupt the economy, it would highlight weak US institutional strength and governance compared to other AAA-rated SWFs we have highlighted in recent years,” Moody’s wrote in its report.
“In particular, at a time of declining fiscal strength, driven by widening fiscal deficits and worsening debt sustainability, rising political polarization will demonstrate significant constraints on fiscal policymaking,” Moody’s added.
CNN noted that when Moody’s said a shutdown was more likely than McCarthy’s ouster. But just because a government shutdown didn’t work this round doesn’t mean those at Moody’s, who rate U.S. debt, think the crisis is averted.
The network explained that before the vote to impeach McCarthy ended, financial markets were already heading into a turbulent day on Tuesday.
U.S. Treasury bond yields rose to their highest level in more than a decade, according to the network, raising investor concerns that higher lending rates could lead to a further downturn in the housing market.
The Dow Jones industrial average fell 430 points, or 1.3 percent, to its lowest close since June. The S&P 500 index fell 1.4 percent, its lowest finish since May. The Nasdaq composite lost 1.9 percent, continuing a late-summer selloff, the network said.
He explained that lowering Moody’s rating would cause Treasury yields to rise to higher levels. Because banks and other lenders often base interest rates on U.S. bond yields, this increases the cost of borrowing.
Will US aid to Ukraine be affected?
US funding for Ukraine faces a new hurdle in Congress, with McCarthy’s ouster giving Republican hardliners a chance to block the next round of aid to Kiev.Bloomberg“.
In the speaker’s absence, the House of Representatives has been unable to approve aid legislation, and it could take a week or more before a successor is chosen, calling into question US military support for Kiev.CNN“.
The agency explained that the fate of U.S. aid to Ukraine’s efforts to counter Russian aggression now rests largely on the shoulders of the council’s next speaker. Republicans plan to hold the House Speaker election on Oct. 11, and all legislative activity will be suspended in the meantime.
A deal reached days ago to avoid a government shutdown in the United States sparked widespread controversy over the future of U.S. support for Ukraine, leading to a last-minute withdrawal of $6 billion in aid to Kiev, the agency said. .Associated Press“.
Congress must figure out by mid-November how to pass another spending bill to keep the government open.
McCarthy’s dismissal stymied the administration’s request to President Joe Biden’s administration for $24 billion in new military aid that was submitted to Congress over the summer.
Several of the network’s analysts estimate Ukraine’s current “burn rate” of equipment, munitions and maintenance in the conflict with Russia at about $2.5 billion per month and possibly a little more. Much of the funding for this spending comes from Washington.
Last week, the Pentagon’s chief financial officer, Michael McCord, warned congressional leaders that money earmarked for Ukraine had run out. In a letter later released by House Democrats, McCord said the Pentagon has about $5.4 billion left in what’s known as the Presidential Withdrawal Authority, which allows for the rapid release of weapons from existing stockpiles. According to the network, that’s basically two months worth of money.
McCord also warned that only $1.6 billion of the nearly $26 billion authorized by Congress to replace weapons and equipment sent to Ukraine remains.
“A sudden cutoff of funding to Ukraine would be catastrophic, leaving it deeply exposed on the battlefield. The U.S. would lose all credibility with its allies everywhere,” the network quoted a political analyst as saying.
For his part, U.S. President Joe Biden announced on Wednesday that he would soon deliver a “major speech” on the importance of supporting Ukraine, while Washington sees political divisions hampering aid to Kiev, Agence France-Presse reported.
And he said Biden “I will give an important speech very soon in which I will address this issue and why it is so important for the United States and our allies to keep our commitments,” he told reporters at the White House.
“It worries me, but I know there are majorities in the House and Senate in both parties who have said they support funding Ukraine,” Biden said Wednesday.
“I’m always worried about any outage,” he added.
He insisted that it was in (the U.S.’s) interest that Ukraine prevailed over Russia.
“It is very important to the United States and our allies that we keep our promises,” the US president said.
The Democratic president declined to specify how long the U.S. would provide military and financial aid to Ukraine if Congress does not approve a new package requested by the White House.
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