US Raises Debt Limit

By Esha Bagora

Public Relations

The United States of America reached its debt limit on Jan. 19. Congress created the debt ceiling in 1917, so that they wouldn’t have to approve each federal loan separately, as the debt ceiling puts a cap on the amount of money the US government can borrow to run the country. If the federal government  hits the debt ceiling, the US will not be able to pay what it owes and will fall into default. Typically, when a government defaults, that country is hit with recession, high interest rates, a stock market crash, and mass job losses. America leads the world’s economy and produces 24.4% of the global GDP (Gross Domestic Product), so the US government defaulting will throw the world into economic turmoil. 

While markets remain calm, the US Treasury has begun to take extraordinary measures to keep the government functioning until at least June. The Secretary of Treasury Janet L. Yellen sent a letter to House Speaker Kevin McCarthy (R-CA) about the measures that the Treasury will take to keep the country from falling into default. Yellen said that the Treasury will suspend the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (PSRHBF) until June 5, or until this debt crisis is resolved by the government. 

The CSRDF provides benefits to retired and disabled federal employees, while the PSRHBF offers health care benefits to USPS employees, retirees, and their dependent family members. The US Treasury froze these funds and benefits previously in December of 2011, causing a period of economic uncertainty. Since 1962, the debt ceiling has been raised nearly 80 times. 

Many political analysts believe that the typical bipartisanship these situations call for will be hard to find. In the past few elections, Republicans and Democrats have found themselves at an even greater divide than ever before. Speaker McCarthy, aligning with his fellow House Republicans, hopes to keep the cap where it is to reduce government spending on Medicare and Social Security. President Biden and the Democrats want to increase the debt ceiling to continue these government programs. The GOP has made it clear that they won’t approve of raising the debt ceiling unless cuts are made to spending programs. 

Representative Don Bacon (R-Ne) told CNN that he’s “not in favor of Biden’s no-negotiating strategy, and I’m not inclined to help. The GOP can’t demand the moon, and Biden can’t refuse to negotiate. There needs to be give-and-take on both sides.” On Jan.13, White House press secretary Karine Jean-Pierre told reporters, “In the past there has been bipartisan cooperation to address the debt ceiling and that’s how it should be. This is not political gamesmanship, and this should be done without conditions.” On Jan. 18, in another press conference, she clarified, “There will not be any negotiations over the debt ceiling – [the White House] will not do that.”

While the way President Biden and Speaker McCarthy will come to an agreement over how to handle the debt ceiling remains unclear, the government hopes to stay out of a default until June. 5 at the latest. 

(Sources: AP News, The White House, CNN, TIME, Washington Post, Visual Capitalist)

Categories: National, News

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