The US could run out of money and default on its obligations as early as June 1st if Congress does not address the issue by either raising or suspending the debt limit. The debt ceiling sets a legal limit for how much money the US can borrow, and it is currently sitting at $31 trillion dollars.
The US had originally hit the debt cap back in January earlier this year when Biden adopted special budgetary maneuvers to buy Congress time to either raise or suspend the limit. The pressure of a June deadline comes from April tax receipts that came in weaker than expected.
It has been shown in the past that waiting until the last minute to raise or suspend the debt limit can have negative impacts on consumer and business confidence, raise borrowing costs, and damage the credit score of the US. Defaulting would also raise unemployment rates and bring the US back into a recession
Recent timetable estimations place pressure on President Biden and House Republicans to come to an agreement. Previously, under Donald Trump's presidency, the Republicans have raised the debt ceiling without conditions, but now with Biden as the president, they are utilizing potential crisis as a political tool. The Republican majority house has passed a bill to raise the debt limit by $1.5 trillion dollars, but it is packaged with spending cuts and other measures that would repeal some of President Biden's recent legislative accomplishments which Democrats would likely not support.https://www.cnn.com/2023/05/01/politics/debt-ceiling-yellen-congress-default/index.html
https://www.youtube.com/watch?v=1c3XSHNCDNU&ab_channel=CBSNews
https://www.nytimes.com/2023/05/01/us/politics/debt-limit-date-janet-yellen.html
https://www.washingtonpost.com/business/2023/05/01/congress-debt-limit-deadline-biden-mccarthy/
https://realeconomy.rsmus.com/what-would-happen-if-the-government-defaults-on-its-debt/
6 comments:
I really like how you focused on a topic that brings attention to the possibility of the United States running out of money and having to default on its obligations if Congress doesn't address the issue by raising or suspending the debt limit. As mentioned, there could be significant negative impacts on consumer and business confidence, borrowing costs, and much more. I like the connection to the political implications of the debt ceiling debate. There needs to be attention toward a solution that can be supported by both parties, and a compromise has to be agreed upon in a timely manner because it is such a critical issue. This post does a great job of recognizing the potential consequences of the debt ceiling debate and the need for a bipartisan solution to avoid negative impacts on the country's economy as a whole.
I think this relates heavily to the idea that we discussed last week, which was whether the US national debt was something to be concerned about. I thought that the increasing debt was not a problem because it was just a natural part of the economy that simply exists, but seeing this post has somewhat changed that idea. If a limit is in place to prevent irresponsible and uncontrolled spending, then it is clear that the debt is indeed a problem. Additionally, I find it interesting how the debt has already been used politically, and that any programs designed to help people have to be balanced against the reduction in incurring more borrowing. This really emphasizes the way tradeoffs are always being made, and how it really depends on what the people want at a given moment.
This is a problem that the U.S. has because of the tense struggle for power the democrats and republicans share. We see time and time again in the United States that the government, instead of trying to prevent or reduce issues, stays in a congressional lock continually arguing over the slight benefits and disadvantages that come with the resolution to a huge problem in the U.S. Instead of continually raising the debt maximum threshold, we should work on lowering the debt by cutting useless spending and focusing legislation and arguments on the legislative floors.
I agree with what everyone has said so far. I think that this is an important issue that needs to be addressed jointly by both parties. There are so many arguments for either side but at this time in history, it is crucial because it will start to take a toll on the economy and relationships with other countries. If no action is taken, the government won't be able to pay salaries for their employees or fund social security along with impacting the global economy. To add on, Yellen mentions in a TIME article that defaulting would "produce an economic and financial catastrophe. Congress must vote to raise or suspend the debt limit. It should do so without conditions. And should not wait until the last minute". It is also important to note what the republican party has done which is pass a spending bill that repeals the energy tax credit, imposes certain work requirements on federal social programs, and many others. This action allows he republican to say that they have done their part.
https://time.com/6279707/debt-ceiling-agreement/
Congress needs to act quickly to resolve the crucial issue of the coming debt ceiling deadline. By June 1st, the US runs the possibility of defaulting on its debts if nothing is done. Waiting till the very last minute can undermine trust, raise borrowing costs, and lower the nation's credit rating. Republicans in the House and President Biden are under pressure to find a deal, but the situation has turned political. Collaboration is required to put financial stability first and avoid negative economic effects.
The debt ceiling debate is ongoing, and it could be extremely detrimental to many aspects of the government's spending if it is not resolved. Congress needs to come to an agreement on how to move forward or they risk billions of taxpayer money due to indecision. I believe that historical compromises can and have been reached and therefore joint endorsement from both parties on how to move forward is necessary. The possibility of defaulting on America's loans is frightening and would negatively impact hundreds of programs across the federal government's vast spending portfolio. The US economic integrity on the international stage would also be negatively impacted as countries would feel uneasy about loaning and investing in US interests. The danger of the impending deadline, by June 1st, cannot be understated, and the nation's leaders need to rally behind a united decision for the fiscal future of the government and its people.
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