US Treasury Secretary Janet Yellen listens to President Biden discuss the federal debt limit on October 6, 2021, in Washington, DC
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Chip Somodevilla / Getty Images
US Treasury Secretary Janet Yellen listens to President Biden discuss the federal debt limit on October 6, 2021, in Washington, DC
Chip Somodevilla / Getty Images
Reaching the national debt ceiling is a big concern for Washington right now.
On Friday, Treasury Secretary Janet Yellen warned that the United States was on track to reach its debt limit, or limit on how much the federal government can borrow. by Thursday. the ceiling is last raised $2.5 trillion in December 2021 to a total of $31.4 trillion.
In the past, Congress has avoided breaking the limit by simply raising it. But House Republicans say they won’t support raising the debt ceiling this time around – not unless they get spending cuts or other concessions.
In a letter to congressional leaders, Yellen said the standoff around the debt ceiling could cause “irreparable harm” to the economy and even global financial stability. She recalls 2011, when the United States reached its debt limitravaged the stock market.
If the US reaches the debt ceiling, the Treasury will have to take “special measures”
If there is a deadlock, a few things can happen.
First, the Treasury will begin circulating funds to make up for the shortfall in cash flow. These actions may last only a few weeks or months. Once these measure Ultimately, the federal government will have a hard time paying its obligations, like Social Security and Medicare.
So far, the US has never defaulted on its debt. But Yellen warned that if Congress doesn’t act, it could happen as soon as June.
The debt ceiling has been raised many times, but this time may be different
Although Congress has a template for raising the limit, the decision to raise the federal debt ceiling is never easy.
House Speaker Kevin McCarthy told President Biden that Republicans were interested in imposing spending caps in exchange for temporarily raising the debt ceiling. McCarthy pointed out a spending agreement 2019 between his predecessor and former President Donald Trump as a role model. That deal includes increased spending on defense and domestic programs.
But White House press secretary Karine Jean-Pierre said Biden was not interested in negotiating.
“This is not and should not be a political football match. This is not a political game. This should be done unconditionally,” she said in a statement. news conference on Friday.
When the US hit the debt ceiling in 2011, it took months for the economy to recover
The last time the US hit the debt ceiling was in 2011 and it rattled markets, driving down stock prices and taking a toll on people’s retirement savings. This is also the first time the federal government saw its credit rating downgraded.
Although the country avoids default, the Ministry of Finance Find The delay in lifting the limit has hurt the economy, which has taken months to recover.
So far, markets are assuming this debt ceiling crisis will work. But the 2011 debt ceiling breach shows that even policy on the brink of war can hurt investors, consumers and businesses.
