“Every time, it’s a mess:” The United States approaches debt ceiling again
The US Congress will learn on Wednesday when the federal government is likely to be strapped for cash to pay its bills, setting the stage for the latest in a long series of fights over what’s known as the debt ceiling.
A failure by Democrats and Republicans to resolve their differences over whether cuts in government spending should accompany an increase in the legal debt limit, currently set at $ 28.5 trillion, could lead to a shutdown of the government. federal government – something that has happened three times in the past decade. “Every time it’s messy,” said senior Senate Finance Committee Republican Mike Crapo, when asked about the debt ceiling adjustment process. He noted that during his nearly three decades in Congress, he had been pushing for spending cuts in those negotiations, adding in a brief interview that he would call for cuts again.
Neither Crapo nor other high-ranking Republicans have raised the threat of a shutdown in recent public statements, and Democrats insist on a ‘clean’ increase in the debt limit without hindrance in a fight for reduction spending. On July 31, the Treasury Department technically runs up against its legal debt limit. Much like the limit on a personal credit card, the debt limit is the amount of money the federal government is allowed to borrow to meet its obligations. These range from paying military salaries and IRS tax refunds to Social Security benefits and even interest payments on debt.
Since the government spends more than it receives in revenue, it continues to operate by borrowing more and more. If Congress does not raise the debt ceiling to its current $ 28.5 trillion by then, Treasury Secretary Janet Yellen should take special steps to avoid a government default. These interim measures are only effective for a short period.
On Wednesday, the non-partisan Congressional Budget Office is expected to release its latest estimate of when the government would actually be unable to pay its bills – the so-called X date. Democrats are considering several options to avoid debt payment problems, such as tying up an increase in the debt ceiling to a bipartisan infrastructure bill being negotiated in the Senate or as part of an interim financing bill in September to avoid government shutdowns on October 1. with the start of the new fiscal year.
Failure could lead to a repeat of the government closures observed in 2013, January 2018 and which lasted 35 days from the end of December 2018 to January 2019. Other factors also played during these disruptions. A sign of Wall Street’s concern about the approaching limits, yields on short-term US Treasury debt have risen to around 0.05%, after hovering near zero since the start of the pandemic. “IF YOU COMMIT YOUR INVOICES, YOU PAY THEM”
Republicans’ cooperation in pushing through an increase in the debt limit is essential given the 50-50 party split in the Senate, where most laws require 60 votes to move forward. “No one should be allowed to hold our economy hostage, especially when we are in a fragile time like this” as the United States struggles to extricate itself from the devastating effects of the COVID-19 pandemic, said said Sen. Ron Wyden, Democratic chairman of the finance committee that oversees the debt ceiling.
“If you incur bills, you pay them,” Wyden added. The brewing battle over budget deficits and debt comes after Senate Republicans earlier this year passed a party rule stating that any increase in the debt limit should be associated with spending cuts.
It is also on the heels of Congress approving approximately $ 5.7 trillion in COVID-19-related relief measures since early 2020 and as Democrats demand more than $ 4 trillion in COVID-19 relief measures. investment in infrastructure, amid an estimated budget deficit of $ 3 trillion this year alone. “There is a day of judgment if we don’t get our budget back in order,” a group of nine conservative Republican senators warned in a July 15 statement.
“ARMY” DEBT LIMIT This sense of urgency angered Democrats, as Republicans had no problem raising the debt limit in 2018 and 2019 when another Republican, Donald Trump, was president and beyond. enacting sweeping pro-rich tax cuts that were expected to add $ 1.8 trillion to the country’s debt.
“I think the debt limit became a weapon some time ago and it created a huge problem,” said Maya MacGuineas, chair of the Responsible Budgeting Committee. Nowhere was this more apparent than in 2011, when Republicans launched a battle for the debt ceiling and federal spending, which led to the first-ever US credit rating downgrade. by Standard & Poor’s, a move that spilled over into global financial markets.
(This story was not edited by Devdiscourse staff and is auto-generated from a syndicated feed.)