WASHINGTON (Washington Insider Magazine) — The U.S. government is heading into uncharted territory as it approaches its credit limit, otherwise known as the debt ceiling. If Capitol Hill doesn’t okay the spending increase, the United States could default on its lenders for the first time in history, leading to global consequences.
What exactly is the debt ceiling?
The debt ceiling is the maximum amount of money the U.S. Government can borrow to pay its debts. It was put into place over a hundred years ago so that the Treasury Department did not have to ask for Congressional signature for already approved spending constantly. The limit has been used to contain expenses and increases each year based on the annual Congressional budget. Although government spending has exceeded the money it was taking in from taxes etc.; it would be the first time in history, the U.S. has defaulted. The U.S. Treasury Secretary, Janet Yellen, warns that if not raised, this limit could be reached as soon as October 18th.
What does this mean?
The impact of default would have dire consequences on both the global and U.S. economy. If they cannot agree and raise the debt ceiling, it could stop payments that millions rely on— payments including paychecks to federal workers, medicare benefits, and social security checks.
It could also significantly affect the U.S. stock market. According to Wall Street, if the U.S. defaults on its credit, it would damage its ability to borrow in the future. It isn’t enough to apologize when dealing with billions of dollars; a missed payment is seen as incredibly derogatory. According to President Biden, defaulting would also increase daily expenses such as mortgage payments, auto payments, and credit cards.
What’s the holdup?
Democrats and Republicans are refusing to cooperate.
Republicans do not wish to increase government spending as a polarization of the issue grips Washington. However, Democrats keep reiterating that raising the debt ceiling does not mean increasing government spending but simply paying debts- debts previously approved by GOP members such as Mitch McConnell and Donald Trump.
Democrats wish to vote on the issue and assert that the Republican Party assist with paying down the debt that they both have incurred. The Republicans refuse, and Mitch McConnell suggests they use a special budget process known as reconciliation that Republicans would not have to vote on. Whatever the holdup, it is putting millions of American’s jobs at stake and is threatening the health of the global economy. President Joe Biden will hold further discussions with lawmakers later this week in hopes of resolution.
