America reached its debt limit. Now Congress prepares for a debt limit standoff
The U.S. federal government reached its $31.4 trillion spending limit Thursday. What happens next?
Will America’s federal government be able to keep paying the bills after this week? It’s working on it. The U.S. reached its federal debt limit on Thursday, prompting swift action from Congress in the coming days.
The New York Times reported that Treasure Secretary Janet L. Yellen requested lawmakers “raise or suspend the cap so that the government can continue meeting its financial obligations,” in a letter to Congress Thursday morning.
“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,” Yellen wrote. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
For now, the Treasury Department is “using special accounting techniques to make sure the government can keep writing checks,” The Hill reported.
The debt limit is at a whopping $31.4 trillion.
What happens next with the federal debt limit?
Since the cap was reached, what happens next is in the hands of Congress and then President Joe Biden. The bipartisan individuals will have to reach “an agreement on how to raise the debt ceiling,” according to CNN.
House Republicans see the debt standoff as an opportunity to curb federal spending on government programs. Some have even suggested changing how Social Security and Medicare are funded by the government.
“I don’t see why you would continue the past behavior,” House Speaker Kevin McCarthy, R-Calif., said in a press conference Thursday, per The Washington Post.
However, Biden’s Democratic administration claims they are not open to negotiating raising or suspending the debt ceiling and requested Congress raise the cap “without condition,” CNBC reported.
The country has found itself with the same problem in the past, when it faced the same bipartisan dynamic of a Republican Congress and a Democratic White House. The Clinton and Obama administrations were in a similar pickle of cutting spending or raising the limit in 1995, 2011, 2012 and 2013, respectively.
Each time, the groups came to the same conclusion: slightly cut back spending in some areas and also suspend or increase the spending cap, per CNN.
America is currently facing extreme economic uncertainty with high rates of inflation, increasing tech company layoffs and a looming possible recession, so financial experts warn lawmakers to come to an agreement sooner, rather than later to avoid economic chaos.
Debates about what to do about the spending limits could last into June.
How did the federal government reach the debt limit?
One question voters and politicians are raising is — how did we get here and why wasn’t the government cut off from spending that much?
It’s complicated, and it includes issues like inflation and a global pandemic, and “in reality, both parties have approved policies that fueled the growth in government borrowing,” The New York Times reported.
However, this isn’t exactly a modern issue. According to The Post, Congress has “intervened 78 times” to raise or adjust the debt ceiling in one way or another since 1960.