The debt ceiling can be confusing, so here is some specific information about it.
- The debt ceiling is a limit on the total amount of government borrowing. It was first put in place by Congress during World War I, but has become a source of political conflict in recent years. ⁴
- If Congress fails to raise the debt ceiling, the U.S. could default on its obligations, which could have severe consequences for the economy and global financial markets. ⁵
- The debt ceiling has already been reached, and the Treasury Department is using extraordinary measures to pay the bills. But these measures may only last until early June. ⁵
How did we get here?
- The national debt is the result of years of deficit spending, which means the government spends more than it collects in taxes. ⁵
- The national debt has increased significantly in the last 20 years, due to factors such as the COVID-19 pandemic, the wars in Afghanistan and Iraq, the rising medical costs of an aging population, and tax cuts under various administrations. ⁵
- The debt ceiling was last raised in 2021, to $31.4 trillion, where it currently stands. ⁵
What are the options?
- Congress could pass a bill to suspend or raise the debt ceiling, as it has done 78 times since 1960. ⁵
- However, this requires bipartisan cooperation, which has been lacking in recent years. Some Republicans have demanded spending cuts or other policy concessions in exchange for raising the debt ceiling. ¹²
- Alternatively, President Biden could invoke a controversial legal argument that the 14th Amendment of the Constitution gives him the authority to ignore the debt ceiling and continue borrowing. But this could face legal challenges and political backlash.
What are the implications?
- If Congress does not act soon, the U.S. could face a default crisis that would damage its credit rating, increase its borrowing costs, disrupt government services, and trigger a recession. ⁵
- A default could also undermine the U.S.'s role as a global leader and a safe haven for investors. It could erode confidence in the U.S. dollar and its status as the world's reserve currency.
- Averting a default would require compromise and leadership from both parties, as well as public awareness and pressure. It would also require addressing the underlying causes of the national debt and finding a sustainable fiscal path for the future.
Sources:
¹: https://www.msn.com/en-us/news/politics/mccarthy-lauds-debt-us-ceiling-deal-house-conservatives-divided/ar-AA1c7yDT
²: https://www.msn.com/en-us/news/other/gop-rep-says-he-s-not-ruling-out-a-government-shutdown/ar-AA1c7qTF
³: https://www.msn.com/en-us/health/other/how-the-debt-ceiling-deal-will-impact-snap-benefits/ar-AA1c7qSW
⁴: https://www.cnn.com/2023/05/30/politics/whats-in-the-debt-ceiling-deal/index.html
⁵: https://www.npr.org/2023/03/23/1163448930/what-is-the-debt-ceiling-explanation
: https://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm
: https://www.washingtonpost.com/business/2023/03/22/debt-limit-biden/
: https://www.brookings.edu/blog/up-front/2023/03/24/the-debt-limit-is-back-and-so-is-the-risk-of-a-default-crisis/
: https://www.cfr.org/backgrounder/us-debt-ceiling-costs-and-consequences
: https://www.pgpf.org/the-fiscal-and-economic-challenge/fiscal-and-economic-outlook
More Reading
(1) Here's what's in the debt ceiling package | CNN Politics. https://www.cnn.com/2023/05/30/politics/whats-in-the-debt-ceiling-deal/index.html.
(2) The debt ceiling: What is it and what happens if Congress fails to .... https://www.npr.org/2023/03/23/1163448930/what-is-the-debt-ceiling-explanation.
(3) McCarthy lauds debt US ceiling deal, House conservatives divided. https://www.msn.com/en-us/news/politics/mccarthy-lauds-debt-us-ceiling-deal-house-conservatives-divided/ar-AA1c7yDT.
(4) GOP Rep. Garret Graves says he's not ruling out a government shutdown after debt ceiling fight. https://www.msn.com/en-us/news/other/gop-rep-says-he-s-not-ruling-out-a-government-shutdown/ar-AA1c7qTF.
(5) How the Debt Ceiling Deal Will Impact SNAP Benefits. https://www.msn.com/en-us/health/other/how-the-debt-ceiling-deal-will-impact-snap-benefits/ar-AA1c7qSW.