The United States reached a limit this week on the amount of money it can borrow, forcing the Treasury Department to implement so-called extraordinary measures to ensure that the country has enough money to meet its financial obligations.
Treasury Secretary Janet L. Yellen told lawmakers that the measures will allow the United States to continue paying military salaries, retirement benefits and interest to bondholders until early June.
But launching these extraordinary measures is the first step in a series of events that will take place as the Treasury tries to keep the United States from defaulting on its debt. Ultimately, it will be up to Congress to decide whether the country should borrow more money or allow it to default on the debt by failing to pay investors who expect interest and other payments.
What’s at stake is the future of the US economy, which could face a financial crisis and spiral into a bigger crisis if lawmakers can’t get their act together.
Some of the looming questions are when the United States will reach the so-called X-date – when the government will no longer be able to find ways to stay under the $31.4 trillion debt and will need to borrow more money or default. his bills.
Another big question: Will Congress agree to raise the borrowing cap?
Meanwhile, House Republicans have vowed to oppose any increase in debt without spending cuts. President Biden said the debt should be raised without conditions.
But before the war that the United States will not be able to repay the debt, Mr. Biden and Speaker Kevin McCarthy of California confirmed separately that they are planning to meet to discuss how to increase the debt.
Listen to US Debt Consolidation
What is the loan amount? The debt ceiling, also called the debt limit, is the interest rate on the total amount that the federal government is allowed to borrow through US Treasury securities, such as bills and savings bonds, to meet its financial obligations. Because the United States has a budget deficit, it must borrow more money to pay its debts.
Here are some of the important things you can expect in the next few months.
Spring Budget Battle
The White House is expected to unveil its midterm proposals in early March, and outline what Biden will use. This could serve as an opening for any negotiations between the Biden administration and Republicans in Congress, who have been pushing for spending cuts and could seize on the document as evidence of what they say is “spending.”
Developing Amazing Techniques
In a letter to Congress on Thursday, Mrs. Yellen said that she is introducing a “debt moratorium” that will last until June 5. As a result, the Treasury Department will no longer be investing in other federal funds and retirement plans.
Ms. Yellen has sent additional letters to lawmakers with updates on how much time the extraordinary measures will buy. He will also explain what the Treasury can do to get under the $31.4 trillion debt.
This could include suspending the daily rebalancing of securities held by the Treasury’s Exchange Stabilization Fund, a currency container that can buy and sell currencies and lend money to foreign governments, or temporarily transferring funds between government agencies and departments to pay as they come. .
Role of Congress
Action on the debt crisis has been waiting until the Treasury Department is about to end its extraordinary measures.
In 2021, the last time the government paid back the debt, Senate Republicans and Democrats agreed to extend the loan less than two weeks before it was due. Two months after the Treasury warned that it could breach the legal limit on borrowing, Congress approved a measure that would raise the debt by $2.5 trillion.
Such a partnership is facing serious challenges at this time.
Mr. McCarthy has asked the Biden administration and the Democrats in the Congress to discuss the reduction of spending in order to win the support of the Republicans in the House for raising the debt. “We need to change the way we spend money in this country,” he said this month, “and we’re going to make sure that happens.”
Mr Biden, speaking at the White House on Friday, said there would be “honest debate” about how to deal with the national debt. He said he plans to make that point in his upcoming State of the Union address, in addition to meeting with McCarthy.
“I accept your invitation to sit down and talk about increasing the debt to stop the government spending,” McCarthy said later. in a statement posted on Twitter. “I look forward to our meeting.”
Democrats, including Senator Chuck Schumer of New York, the majority leader, have so far resisted the prospect of negotiations that force spending cuts or cuts to Medicare and Social Security.
However, Democrats cannot agree on the need to continue raising the debt without addressing the budget deficit. Senator Joe Manchin III of West Virginia, the top Democrat, has signaled some support for some refinancing as Congress considers raising the debt ceiling.
Acts of Parliament
In describing the steps that Congress can take to solve the debt problem, officials and supporters have given the opportunity to use a process in the House called petition. That would allow Republicans to advance legislation that McCarthy and many other Republican leaders disagree with if they work with Democrats.
But while that approach “can be used to address a number of regulatory challenges,” Molly Reynolds, a senior fellow on governance at the Brookings Institution, cautioned that “it’s not the best approach.”
The job is difficult and fraught with politics, as it limits the power of the Speaker of the House and oversight on the floor. Lawmakers must settle on a measure that has the support of enough Republicans and Democrats — and can get 60 votes in the Senate — and send it to committee.
Lawmakers must allow the measure to sit in committee for 30 days while the legislature is in session, a period that could last several months depending on the order of the chamber. Lawmakers must gather 218 signatures on the petition — meaning at least a handful of Republicans must join every Democrat in opposing their leaders.
Once the signatures are collected, the lawmaker must wait an additional seven days before declaring his intention to bring the vote to Parliament. The notice requires the speaker to arrange a vote within two days of the enactment of the law.
But because of the length of the process and the political consequences of Republicans forming a public coalition with Democrats against their majority, it is not certain that the legislative tool can be used to prevent betrayal.
It has not been used since 2015, when the House voted to reopen the federal Export-Import Bank and Republicans who joined with Democrats to support the measure were backed by the outgoing speaker, John A. Boehner, shortly before his resignation. But the threat of higher interest rates has been enough to force party leaders to vote on legislation they otherwise would not have considered.