Debt Ceiling Crisis Looms: Congress Must Act to Avert Economic Disaster
The United States is currently facing a potential default on its debt if Congress fails to raise the debt ceiling. The current debt ceiling is set at $31.4 trillion and the Republican-led lawmakers in Congress have stated that they will not raise the limit unless there is a large cut to social safety net programs. If Congress fails to reach a decision, the government will be forced to shut down, the stock and bond markets will tank, and a worldwide financial panic will ensue.
The Biden administration has signaled plans to meet with House Speaker Kevin McCarthy (R-Calif.) on the issue, though the White House has said that he will merely reiterate his current position that the debt ceiling is not subject to negotiation. Senate Majority Leader Chuck Schumer (D-N.Y.) has dared House Republicans to propose and vote on the deep spending cuts they demand in exchange for lifting the debt ceiling.
The debt ceiling was established by Congress in 1917 and limits the money that the government is allowed to borrow. It has been raised many times, usually on a bipartisan basis, and currently stands at about $31 trillion. But with increased spending, the debt ceiling could easily be reached again if Congress does not act.
The consequences of a default would be far-reaching. Federal and military pay and benefits would be impacted, and veterans benefits would not be paid or would be delayed. The stock and bond markets would tank and the bond rating agencies would downgrade U.S. securities. The Biden administration has a number of options to prevent a default, ranging from accounting tricks to a decision to ignore the debt ceiling altogether.
The Republican party is demanding that the Biden administration commit to spending cuts before agreeing to raise the debt limit. Democrats, on the other hand, want to raise the borrowing limit quickly, with no strings attached. With the risk of a U.S. default looming, President Biden should take Speaker Kevin McCarthy up on his offer to negotiate and make him state on the record his party’s demands. It is now up to Congress to come together on a package to increase the debt ceiling and avert a looming economic disaster.
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