U.S. hits debt ceiling. Amid fears of debt default, Treasury begins 'extraordinary' measures
The Treasury's 'extraordinary measures' are meant to avoid a default as a debt ceiling fight looms in Congress.
WASHINGTON – The Treasury Department Thursday began “extraordinary measures” to pay the nation’s bills after reaching a limit on how much it's allowed to borrow, Treasury Secretary Janet Yellen told Congress.
While the United States has been in this position before, fears are rising over whether political brinkmanship will prevent the limit from being raised as it has in the past, risking an economic calamity.
The amount of time the Department can continue taking steps to avoid defaulting on the debt unless the $31.381 trillion limit is raised is uncertain, Yellen wrote in her letter to lawmakers. But the government is expected to be able to keep operating until at least June.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” she said.
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Some House Republicans are insisting Democrats agree to spending cuts in exchange for Congress raising the debt limit.
“We cannot raise the debt ceiling,” Rep. Andy Biggs, R-Ariz., tweeted Tuesday. “Democrats have carelessly spent our taxpayer money and devalued our currency. They've made their bed, so they must lie in it.”
The White House insists the limit be raised “without conditions.”
“We're not going to negotiate on this,” White House press secretary Karine Jean-Pierre said Tuesday. “The basic duties of Congress is to deal with this issue.”
What is the debt ceiling?
The debt ceiling refers to the maximum amount the U.S. government can spend on its existing obligations, including Social Security and military salaries.
Voting to raise the debt ceiling would not be a vote to spend more money. Without a higher debt ceiling, the government would default on bills it already has incurred and has committed to pay.
What happens if the U.S. defaults on its debt?
Economists warn that defaulting on its debt – something the U.S. has never done – could cause financial markets to tank, hurting 401(k)s and other investments. A debt ceiling standoff in 2013 cost the economy 1% in GDP.
How many times has the U.S. raised its debt ceiling?
Since 1960, Congress has acted 78 times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents, according to the Treasury Department.
That includes three times during the Trump administration. House Speaker Kevin McCarthy, R-Calif., voted for those increases, White House principal deputy press secretary Olivia Dalton said Thursday.
"And there's no reason that this position should change," she added.
McCarthy said Sunday it's "arrogant" to assume there's no government waste.
"Let's sit down and change our behavior for the good of America, because what we're going to do is bankrupt this country and bankrupt these entitlements if we don't change our behavior today," he said on Fox News.
What are people saying about the debt limit?
The nonpartisan Committee for a Responsible Federal Budget called Thursday for Congress to raise the debt ceiling as quickly as possible.
“The debt ceiling is too important to turn into a game of chicken, and default should never be suggested by those with a fiduciary responsibility to govern the nation,” said Maya MacGuineas, the group’s president.
Politicians worried about the nation’s unsustainable borrowing should oppose legislation that would add to the debt while offering specific solutions to control financial obligations already on the books instead of threatening not to pay down debt that already has been incurred, MacGuineas said.
“An ideal solution would be for Congress to lift the debt ceiling as soon as possible and at the same time put in place measures to improve our fiscal trajectory,” such as specific policies or processes such as a fiscal commission, she said.
What happens if the debt ceiling is it?:Here's what to expect if we reach debt limit.
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