The U.S. is about to hit its debt limit earlier than expected, federal lawmakers are feuding about whether or not to raise the limit.
Key Details
- By January 19, the U.S. will reach its debt limit. U.S. Treasury Secretary Janet Yellen will invoke what the Treasury calls extraordinary measures to allow the U.S. government to continue operations.
- These methods will extend the deadline to raise the ceiling until June.
- Secretary Yellen’s plans are to redeem investments from various retirements—including the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund—and temporarily stop making new investments in these funds.
- The Treasury Department will also pause investment in the Federal Employees Retirement System Thrift Savings Plan and the Government Securities Investment.
- Congress must now decide whether or not to raise the debt ceiling, but the two parties are strongly divided.
- The debt ceiling was last raised in 2021 to around $31.4 trillion.
- If no agreement is reached, it could trigger a government shutdown. The last government shutdown was in 2019. During a shutdown, non-essential government employees are furloughed while essential workers work without pay. When the shutdown is resolved, workers will receive back pay. Some government services may also be temporarily suspended during a shutdown.
Why it’s important
The debt ceiling is a tool that allows the federal government to more easily access needed funding. This limit is the total amount the government can borrow to cover the cost of services such as Social Security, Medicare, military salaries, tax refunds, and other payments.
Raising the debt limit was not always a political issue. The routine procedure became a hotly debated issue in 1953 when President Dwight Eisenhower requested an increase in order to further fund his national highway system. Since then, raising the ceiling has had the potential to be a contentious issue, though it is often raised without much fight.
The most significant disagreements resulted in temporary government shutdowns in 1995 and 1996. In 2011, Congress once again struggled to raise the limit and the U.S. government’s credit rating declined for the first time. The debt ceiling was actually suspended for the first time in 2013 after parties could not come to an agreement.
Republican Speaker of the House Kevin McCarthy is attempting to negotiate a cap on government spending. The White House on the other hand has indicated that there will be no negotiations.
In exchange for raising the debt ceiling, Republicans are asking for spending decreases and reforms in several key areas including Medicare and Social Security. Comments from Speaker McCarthy indicated that the GOP is prepared to buckle down on these demands as he told Fox News, “one of the greatest threats we have to this nation is our debt.”
The opposition isn’t likely to give in quickly either. White House Press Secretary Karine Jean-Pierre told reporters last week that the question of raising the debt limit shouldn’t be filed with negotiations, saying it “should be done without condition.”