The U.S. federal government is set to hit its debt limit of 31.4 trillion dollars within days, and this has sparked fierce debate on Capitol Hill on whether or not to raise the debt ceiling.
Secretary of the Treasury Janet Yellen had announced back on Jan. 13 that the debt limit would be reached the following Thursday, Jan. 19, and that not raising it could cause “irreparable harm” to the economy.
“Once the limit is reached, [the] Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” Yellen said in a press release. “Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.”
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Yellen went on to say. The announcement has sent shockwaves through Congress as a battle over whether to raise the debt ceiling is looming.
The U.S. debt ceiling is the limit congress places on the amount of money that the federal government borrows to pay the bills. According to the Treasury, the U.S. ran a 1.38 trillion dollar deficit in 2022, meaning the government spent 1.38 trillion more than what it brought in as tax revenue. Borrowing money is how the government makes up this difference and how the debt accumulates over time.
The deadline has sparked debate among lawmakers who are divided on the fiscal policies of the United States. On the one hand, congressional Democrats are demanding a raise or abolishment of the debt ceiling like Senator Elizabeth Warren has voiced support for. On the other hand, congressional Republicans are calling for spending caps, cuts and other provisions to reform the government’s spending habits.
“It’s long past time for Washington to end the reckless spending of taxpayer dollars and start living within its means,” Sen. Rick Scott (R) of Florida states on Twitter. “I’ll be fighting with every tool at my disposal to finally end Biden’s raging inflation crisis and bring fiscal sanity back to Washington.”
With Republicans controlling the House, and Democrats controlling the Senate, any bill would have to go through both party majorities in order to pass. House Minority Leader Hakeem Jeffries signaled opposition to Republican efforts, “We will not let the U.S. economy be held hostage by Extreme MAGA Republicans who want to detonate Social Security and Medicare.”
Speaking with UVU Professor of Economics Abdus Samad, he stresses the importance of how reaching the debt ceiling can have a major impact on a nation’s credit rating.
“If you can’t pay [your expenses], then you are not in good standing,” Samad stated. He noted that it depends heavily on how the financial sector reacts to the limit being reached and a downgrade in a credit rating, but generally reaching the debt limit would have a negative impact on the economy.
President Biden has stated that he won’t be negotiating when it comes to the debt ceiling. Press Secretary Karine Jean-Pierre stated in a press briefing that “it’s not and should not be a political football. This is not political gamesmanship. … This should be done without conditions.”
As this story develops, The Review will continue to update on the details.