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U.S. Hits the Debt Ceiling Amid Fears of Debt Default Treasury Begins ‘extraordinary’ Measures
Treasury Secretary Janet Yellen informed Congress on Thursday that the Treasury Department had begun “exceptional steps” to pay the nation’s obligations after surpassing its borrowing limit. While the US has been in this position before, concerns are growing about whether political brinkmanship would prevent the ceiling from being lifted as it has in the past, triggering an economic disaster.
Yellen stated in her letter to Congress that the amount of time the Department can continue taking actions to prevent defaulting on the debt is uncertain unless the $31.381 trillion cap is raised. However, the government is projected to be able to function until at least June.
“I sincerely ask Congress to act swiftly to safeguard the United States’ full confidence and credit,” she said. Some House Republicans are demanding that Democrats agree to spend cuts in exchange for increasing the debt ceiling.
“We cannot lift the debt ceiling,” Arizona Rep. Andy Biggs tweeted Tuesday. “Democrats have irresponsibly spent our taxpayer money and devalued our currency. They’ve created their bed, so they’ll have to sleep in it.”The White House insists on raising the limit “without restrictions.”
“We will not negotiate on this,” White House press secretary Karine Jean-Pierre said Tuesday. “One of Congress’s primary responsibilities is to address this issue.” Janet Yellen, Treasury Secretary, speaks at the Treasury Department in Washington on January 10, 2023. The federal government is on track to exhaust its $31.4 trillion borrowing capacity as early as this month. That sets the stage for a potential conflict between President Joe Biden and the new Republican House majority.
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Table of Contents
What Exactly Is The Debt Ceiling?
The debt ceiling is the maximum amount that the United States government can spend on current obligations such as Social Security and military salaries. Voting to raise the debt ceiling is not a vote to increase government spending. Without an increase in the debt ceiling, the government would default on payments it has already incurred and agreed to pay.
What If The United States Defaults On Its Debt?
Economists warn that defaulting on debt, which the United States has never done, may lead financial markets to crash, harming 401(k)s and other investments. The 2013 debt ceiling stalemate cost the economy 1% of its GDP.
How Many Times Has The United States Lifted The Debt Ceiling?
According to the Treasury Department, Congress has acted 78 times since 1960 to permanently raise, temporarily extend, or change the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents.
This includes three occasions during Trump’s presidency. House Speaker Kevin McCarthy, R-Calif., voted in favor of the increases, according to White House principal deputy press secretary Olivia Dalton. “There is no reason for this view to change,” she continued.
McCarthy called it “arrogant” to presume there is no waste in government on Sunday. “Let’s sit down and alter our conduct for the good of America because if we don’t change our behavior today, we’re going to bankrupt this country and bankrupt these entitlements,” he stated on Fox News.
What Do People Think About The Debt Ceiling?
The nonpartisan Committee for a Responsible Federal Budget urged Congress on Thursday to lift the debt ceiling as soon as feasible. “The debt ceiling is too essential to turn into a game of chicken, and default should never be urged by people with a fiduciary responsibility to lead the nation,” said the group’s president, Maya MacGuineas.
Politicians concerned about the nation’s unsustainable borrowing should oppose legislation that adds to the debt while offering specific solutions to control financial obligations already on the books, rather than threatening not to pay down debt that has already been incurred, according to MacGuineas.
“An ideal solution would be for Congress to raise the debt ceiling as soon as possible while also putting in place measures to improve our budgetary trajectory,” she said, referring to particular policies or processes such as a fiscal commission.