The United States reached its current debt ceiling of $31.4 trillion on Thursday and must take extraordinary measures to meet its payments if Congress does not act.
The United States hit the ceiling on its public debt set by Congress on Thursday, forcing the Treasury Department to begin taking extraordinary measures to keep the government paying its bills and increasing pressure on lawmakers on Capitol Hill to prevent a catastrophic default.
The nation’s public debt ceiling is the total amount of money the United States can borrow to meet its legal obligations, including Social Security and Medicare benefits, as well as military salaries, tax refunds, interest on the national debt and other payments.
Treasury Department Secretary Janet Yellen wrote a letter Thursday to House Speaker Kevin McCarthy informing him that the nation’s outstanding debt is at its legal limit of $31.4 trillion and that the agency will implement measures extraordinary to avoid defaulting on its debt, which would have enormous consequences for the US economy, global financial stability, and many Americans. Yellen said the extraordinary measures would last until June 5.
Political battle between Congress and the Administration
The battle lines for the high-stakes political fight to raise the debt ceiling have already been drawn.
Hardline Republicans, who have enormous influence in the House of Representatives because of their party’s majority, have demanded that lifting the debt limit be tied to spending cuts, specifically related to Social Security and Medicare.
The White House responded that it will not offer any concessions or negotiate to raise the debt ceiling.
Even a brief delay could interfere with recipients’ ability to pay for health care, food, rent, utilities or other necessary expenses, the National Committee to Preserve Social Security and Medicare said in a statement Thursday.
The solution to the drama of raising the debt ceiling lies in the hands of lawmakers, as fears grow that partisan politics could result in the nation defaulting on its debt for the first time in history, or coming dangerously close to doing so, and cause a global financial crisis.
The debt limit measure was introduced in 1917 in the United States to stop having to approve every Treasury spending request during World War I, without losing sight of the size of the debt.
As highlighted by the Brookings Institution, no other country in the world, except Denmark, has a separate rule that limits debt, something that for that laboratory of ideas demonstrates the “uselessness” of the measure.
A full default “would be playing with fire and jeopardize the US position as a risk-free borrower in global credit markets,” the institution said.