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“Debt Ceiling and Chinese Balloons: How These Issues are Impacting the State of the Union”
As the launch of a suspected Chinese spy balloon weighs on US-listed Chinese stocks and President Biden prepares to deliver his State of the Union address, here’s what you need to know from Washington, DC this week:
Chinese spy balloon fallout
President Biden’s decision to launch a Chinese surveillance balloon over the weekend has put US-China tensions at the forefront of Washington politics.
Chinese officials claimed the balloon was used “primarily for meteorological” purposes; However, reports of another balloon over Latin America have raised questions about China’s surveillance and espionage capabilities.
A suspected Chinese high-altitude surveillance balloon flies over Charlotte, NC, USA on February 4, 2023. (Photo by Peter Zay/Anadolu Agency via Getty Images)
House Speaker Kevin McCarthy (R-CA) and Republicans have criticized Biden for not shooting down the balloon sooner and are reportedly considering passing a resolution that would condemn Biden’s handling of the situation.
Democrats have backed down, suggesting that Republicans care too much about playing politics rather than banding together to confront China on the situation. Republicans and Democrats have attempted to make strategic competition with China a bipartisan issue, most notably through McCarthy’s decision to create a China Commission.
The escalating tensions as a result of the balloon situation also prompted Foreign Minister Antony Blinken to cancel his planned trip to China. Meanwhile, China has criticized Biden’s decision to shoot down the balloon, and it remains unclear how America’s strategic partners will interpret the incident.
U.S. President Joe Biden speaks as he attends the DNC 2023 Winter Meeting in Philadelphia, Pennsylvania, the United States, February 3, 2023. REUTERS/Elizabeth Frantz
state of the nation
Biden is expected to address the challenge of China, among other issues, in his State of the Union address Tuesday night.
Investors will be on the lookout for clues as to whether Biden will introduce additional sanctions and trade controls in response to China’s actions. Biden is also expected to urge Congress to continue his support for Ukraine as some Republicans have begun to question the US’ long-term financial commitment to the country.
Domestically, Biden is likely to outline a vision for the country’s economy at a time when strong jobs data have fueled investor fears that the Federal Reserve will hike rates further to fight inflation.
It’s also worth noting that Biden’s State of the Union address is being interpreted as an opening bid for a possible re-election campaign. Although television viewership has declined in recent years, the State of the Union still boasts one of the largest collective viewership figures for a White House resident.
US House Speaker Kevin McCarthy (R-CA) exits the West Wing after meeting with US President Joe Biden to discuss federal debt limits and spending at the White House in Washington, United States, February 1, 2023 to discuss. REUTERS/Kevin Lamarque
debt ceiling
The stalemate on the debt ceiling continues.
Speaker McCarthy’s meeting with Biden at the White House last week seemed to indicate that both sides are ready to raise the debt ceiling before the US defaults on its debt, which is likely to happen by late summer or early fall.
Though an agreement has not yet been reached, McCarthy told conservative media after meeting Biden that he remains optimistic he will be able to get Democrats to concede spending cuts on government programs.
But that will be a tough sell for Democrats — especially progressives, who will press Biden as a new election cycle approaches.
Kevin Cirilli is a Visiting Media Fellow at the Atlantic Council’s Global China Hub and the Krach Institute for Tech Diplomacy in Purdue. Follow him on LinkedIn Here.
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