The Biden administration is warning that, unless Congress takes action, the federal government could be unable to pay its bills by June. This week, the United States Treasury Department announced it would take “extraordinary measures” to avoid hitting the debt ceiling and to continue funding the government through early June. But those temporary moves only delay the showdown over the nation’s financial responsibilities between President Joe Biden and a Congress under divided party rule.

What is the debt ceiling?

Every year since 2001, the U.S. government has spent more than the revenue it brings in through taxes and fees. The government borrows money to cover the funding gap so it can continue to pay for an array of federal programs and agencies — from the U.S. military to Social Security and Medicare for retirees. The government raises this money by selling interest-bearing securities such as Treasury bonds.

The debt limit — or debt ceiling — is a federal law that caps the amount of money the United States can borrow to meet those legal spending obligations.

Contrary to some public perceptions, raising the debt ceiling does not authorize the U.S. to spend more money. Congress has ultimate authority over the budget process, and each year lawmakers vote on spending bills. But since 1917, there has also been a legal limit imposed on the total amount of debt that the U.S. government can take on. Raising the debt limit simply authorizes the Treasury Department to make payments on spending that Congress already approved.

The U.S. has raised the debt ceiling 78 times since 1960, according to the Treasury Department. Congress votes to raise the debt ceiling separately from votes on government spending or taxation.

Many Republican lawmakers contend that the federal government spends too much money. Some suggest refusing to raise the debt limit as a way to rein in expenditures.

But some economists warn a first-ever failure to pay interest on America’s $31.4 trillion national debt would trigger wide-ranging global consequences, including a downgrade of the United States’ credit rating and a devaluing of the U.S. dollar that could possibly lead to a stock market crash and an economic recession.

What are the “extraordinary measures?”

The U.S. Treasury can temporarily postpone hitting the debt ceiling through creative accounting measures. These can include moving debt among government agencies as payments come due, suspending investment in the purchase and selling of currencies and temporarily pausing investment in pension plans for government workers.

How much time all of these actions will buy is unclear. In a January 13 letter to the U.S. Congress, Treasury Secretary Janet Yellen wrote, “it is unlikely that cash and extraordinary measures will be exhausted before early June.”

At some point the U.S. will have to resolve the impasse by raising the debt ceiling or massively cutting back on its obligations. For the vast majority of lawmakers, Democrat and Republican alike, halting funding for the military or severing Social Security payments to retirees would be unthinkable.

How do the White House and congressional Democrats propose to solve the standoff with Republicans over the issue?

Biden and Democrats, who hold a slim majority in the Senate, want to raise the debt ceiling as has often been done with little or no debate in past decades.

But in 2011, as the United States approached a debt ceiling breach, the Republican-majority House of Representatives asked then-President Barack Obama for a series of spending cuts in return for raising the borrowing limit. Two days before the Department of Treasury estimated the limit would be exhausted, Republicans agreed to the raise in return for a package of future spending cuts.

Despite averting fiscal catastrophe, America’s long term credit rating was downgraded slightly in 2011, due in part to the debt ceiling brinksmanship in Washington. Economists fear the current standoff could trigger another downgrade.

The sort of deal hammered out in 2011 may no longer be possible today. White House Press Secretary Karine Jean-Pierre told reporters last week: “We will not be doing any negotiation.”

In a joint statement, Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries said, “A default forced by extreme MAGA Republicans could plunge the country into a deep recession and lead to even higher costs for America’s working families on everything from mortgages and car loans to credit card interest rates.”

What do Congressional Republicans want?

Republicans argue raising the debt ceiling is financially irresponsible and that instead the U.S. should cut back on wasteful spending to lower its debt.

“We’ve got to get our house in order,” Speaker of the House Kevin McCarthy told reporters last week. “Republicans — we will always protect Medicare and Social Security. We will protect that for the next generation going forward. But we are going to scrutinize every single dollar spent. It’s the right of a hard-working taxpayer.”

In a weekly conference meeting, House Republican leadership reportedly told members they would not agree to raising the debt ceiling without fiscal reforms, including a fiscal year 2024 cap on spending at 2022 levels and balancing the U.S. budget within the next 10 years.

However, a compromise between the two parties is necessary because any legislation passed in the Republican-majority House of Representatives also must pass the Democratic-majority Senate and be signed into law by President Joe Biden.

The U.S. raised the debt ceiling three times while Republican President Donald Trump was in office. Republicans controlled the Senate for the entirety of his administration and the House of Representatives for his first two years in office.

Source: VOA

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