US Government Debt Reaches Ceiling
On January 19, the United States reached its debt ceiling. This means the government cannot spend more than a certain amount on its existing obligations, such as Social Security and military pay. Treasury Secretary Janet Yellen warned that the US could risk a default starting from June if Congress doesn’t raise the debt ceiling.
The Consequences of Not Raising the Debt Ceiling
Before June, Congress needs to raise or suspend the debt ceiling to avoid various economic consequences. If they don’t, the US government will face spending cuts and have to rely on incoming revenue to pay its obligations. The consequences of these cuts could include delays or a reduction in benefits granted by the government, such as Social Security payments, Veterans Affairs benefits, and impacts on Medicare and Medicaid.
The Politics of Raising the Debt Ceiling
House Speaker Kevin McCarthy has signaled that there has been no progress in ceiling negotiations between House Republicans and the White House. Meanwhile, the White House believes that while spending cuts are necessary, they will not negotiate the debt ceiling and are hoping that Republicans will lift the limit.
The Fiscal Impact on Your Pocketbook
A failure to raise the debt ceiling could result in a partial government shutdown, which would result in a suspension of government functions in various areas of public administration. It could also lead to more taxes on non-defense spending and a minimum tax for the richest Americans. Finally, a rising national debt could lead to a weaker dollar and higher interest rates, which would affect loans and credit card holders.
