Federal debt limit: What to know as Republicans and President JoeBiden prepare for battle
The U.S. debt limit is the total amount of money the government is allowed to borrow.
Lawmakers have raised the debt limit nearly 100 times since it was enacted in order to prevent the United States from defaulting, and Democrats are pushing for Congress to raise it once again this year. House Republicans, though, now in the majority, are hoping to exact concessions from President Joe Biden in exchange for voting to increase the ceiling.The threat represented by the debt ceiling is not the same as the threat of a government shutdown — it’s much more serious.
The debt subject to the limit stood at $31.3 trillion as of Friday, just short of the $31.4 trillion limit.When the limit is reached, the Treasury may no longer issue new debt — that is, Treasury bills, notes, and bonds. Still, the extraordinary measures will eventually run out. Yellen said they would be sufficient to carry the U.S. through early June, setting up a rough deadline for the congressional showdown.
Past Treasury secretaries of both parties have said there is no workable plan for prioritizing payments — that doing so would not be feasible. During the closest brush with default, the 2011 debt limit crisis, the economy still experienced a blow despite the default never materializing. Stock prices fell in the lead-up to the eventual agreement to raise the ceiling, and it took half a year for them to recover fully, according to the New York Times. Additionally, credit rating agency Standards & Poor’s downgraded the U.S. economy from its AAA rating.
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