Budget wars shake up the U.S. Congress

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The U.S. is now constantly on the verge of a new round of inflation, recession, global banking crisis and even default. However, such dangerous prospects do not stop the fundamental confrontation between the Republican and Democratic parties. The new battleground for them is the country’s draft budget for 2024, which is being debated in Congress. During this debate, political speculation appeared in all its glory, based on years of “idealized” party positions that often do not correspond to the adequacy of the current moment. The desire to do harm to their political opponents at any cost, even without regard to the threats of national losses, was also evident. However, at the heart of the confrontation were the quite logical and expected demands of each of the political forces.

The Republicans were the first to present their draft of the state budget for the next year on February 9. They made an accent on the reduction of the expenditure lines for the programs which have caused political scandals in the recent years. So, for example, they want to cut the budget of the U.S. Department of Health and Human Services by one third as revenge for imposing a racial-gender agenda and supporting “sex reassignment” operations. They also propose to tighten conditions for receiving social benefits, such as Medicaid health insurance benefits and grocery cards for low-income Americans. Donald Trump’s fellow party members also intend to severely cut the FBI budget in connection with the scandals of political persecution of supporters of the former president. According to their plan, all U.S. international aid to other countries through the USAID and the State Department could be cut almost in half. Key recipients could be hit: Ukraine, Afghanistan, Jordan, Egypt, Ethiopia, Iraq, Nigeria, South Africa, and several other countries.

Most sharply, Republicans continue to criticize the Biden administration for its lack of a strategy on Ukraine, which was the largest and most overblown spending in the 2023 budget by the outgoing Democratic majority in Congress. This is why Republicans are now threatening to cut off funding for the Ukrainian agenda if the situation on the front reaches a stalemate. They have long suggested that they stop doing “charity” in Ukraine and shift the responsibility for Kiev to the Europeans. The White House will definitely not agree to support such a budget draft. However, sooner or later Biden will have to make some kind of compromise with the Republicans. Otherwise, the U.S. government could face a dire situation this summer… In addition, if the debt ceiling cannot be raised, the U.S. will face a technical default, which could have devastating consequences for the entire world economy and put an end to Joe Biden’s own prospects in 2024.

As expected, the White House followed Congress in presenting its draft budget for fiscal 2024, which begins in October, and it turned out to be quite different from the “Republican” one. The budget is proposed to be a record $7 trillion, but then the state budget deficit will also be record-breaking, which will be almost $2 trillion. Moreover, Biden’s team mainly wants to focus on the social sphere in order to buy votes of the voters. By comparison, even the very considerable military expenditures will increase by only 3%, which is half the rate of current dollar inflation, and the growth rate of the military budget will be much lower than it was last year. Of the proposed $842 billion to the Pentagon, $38 billion will be spent on the ongoing modernization of U.S. nuclear capabilities. Washington is worried about the strategic weapons gap with Russia and China, and is now trying to close it.

For the Pentagon’s Pacific strategy against China, it is proposed to allocate $9 billion and for Ukraine, only $6 billion, which is much less than the spending on Ukraine last year. Biden understands how ambiguous the Ukrainian question of compromise on China is. However, Ukrainian expenditures were usually negotiated in separate tranches, and closer to the case, Biden’s cabinet may prove tricky. In the context of military spending, the White House is obviously looking for a compromise with Republicans, who are demanding a freeze in the defense budget over the next few years in order to stabilize the national debt. The priority of spending on confronting China rather than Russia, which is what many Republicans have been calling for, is also a sign of this. But the rest of the proposals, including steep tax increases for wealthy Americans and expanded social spending, are sure to be rejected by Republicans. Therefore, the budget war in Washington will continue and it could go on until the U.S. is facing a real threat of a technical default because of the inability to agree on a budget and raise the debt ceiling. It is unlikely that a disaster will occur this summer, but the disagreement over financial strategy between the two leading parties will grow each time. While the Democrats stand on maintaining the current “financial hegemony” based on permanent foreign debt, the Republicans are going to adopt a path of austerity reforms in the name of developing the country’s new industrial potential. This means that sooner or later their differences will become insurmountable.