Home Economy The US has reached its debt limit. What happens next?

The US has reached its debt limit. What happens next?

by SuperiorInvest

United States this week he hit a limit on how much money he can borrowwhich forced the Treasury to launch so-called emergency measures to make sure the nation had enough cash to meet its financial obligations.

Treasury Secretary Janet L. Yellen told lawmakers that the measures would allow the United States to pay military pay, pension benefits and interest to bondholders until at least early June.

But initiate them emergency measures is just the first step in a series of steps that will take place as the Treasury seeks to prevent the United States from defaulting on its debt. Ultimately, it will be up to Congress to decide whether to let the country borrow more money or allow it to default on its debt by not paying investors who expect interest and other payments.

At stake is the fate of the U.S. economy, which could face a financial crisis and slide into a deep recession if lawmakers can’t come to an agreement.

Among the looming questions is when the United States will hit the so-called X-date — the point at which the government can no longer find creative ways to stay under the $31.4 trillion debt limit and will have to borrow more money or default. his accounts.

The next big question: Will Congress agree to raise the borrowing limit?

So far, House Republicans have vowed to oppose any increase in the debt limit without spending cuts. President Biden said the debt limit must be raised without conditions. That was set what could be a protracted struggle ensure that the United States defaults on its debt.

Here are some of the key moments to expect over the next few months.

The White House is expected to present its annual budget proposal in early March, outlining Mr. Biden’s spending priorities. That could serve as an opening bid for any negotiations between the Biden administration and Republicans in Congress, who have called for spending cuts and are likely to seize on the document as evidence of what they say is “wasteful spending.”

In a letter to Congress on Thursday, Ms. Yellen said she was beginning a “suspended period of debt issuance” that would last until June 5. As a result, the Treasury Department will no longer invest funds in certain federal health and pension plans.

Ms. Yellen will most likely send more letters to lawmakers with updates on how much more time she can buy with these emergency measures. It will also outline other measures the Treasury can take to stay under the $31.4 trillion debt ceiling.

This could include suspending the daily reinvestment of securities held by the Treasury Exchange Stabilization Fund, a bucket of money that can buy and sell currencies and provide financing to foreign governments, or temporarily moving money between government agencies and departments so that payments can be made as they are payable. .

Congressional action on the debt limit is increasingly pending until the Treasury Department nears the exhaustion of its emergency measures.

In 2021, the last time the federal government reached the debt ceiling, Senate Republicans and Democrats agreed on a short-term extension of the borrowing ceiling. less than two weeks before the delay. Two months later, as the Treasury warned, it did she may have exceeded the legal limit of her borrowing capacityCongress gave his final approval to a measure that would raise the debt ceiling by $2.5 trillion.

Such an agreement faces tougher conditions this time.

Speaker Kevin McCarthy of California called on the Biden administration and congressional Democrats to negotiate spending cuts to gain support from House Republicans to raise the debt limit. “We need to change the way we spend money in this country,” he said this month, “and we’re going to make that happen.”

Democrats, including Sen. Chuck Schumer of New York, the majority leader, have so far rejected the prospect of negotiations.

Still, Democrats may not agree with the need to approve an increase in the debt ceiling without addressing the budget deficit. Sen. Joe Manchin III of West Virginia, a centrist Democrat, signaled some support limiting some expenses as Congress considers raising the debt limit.

In charting possible paths for Congress to resolve the debt ceiling impasse, officials and aides have raised the possibility of using a procedural tool in the House known as a discharge petition. That scenario could allow rank-and-file Republicans to push legislation that Mr. McCarthy and other Republican leaders do not support in the majority if they join forces with Democrats.

But while the mechanism “can be used to address several different bottlenecks in the legislative process,” Molly Reynolds, a senior fellow in governance studies at the Brookings Institution, cautioned that “it’s not a particularly elegant strategy.”

This process is difficult and politically demanding because it undermines the authority of the Speaker of the House and the procedural control of the proceedings. Lawmakers would have to settle for a measure that has the support of enough Republicans and Democrats — and could secure 60 votes in the Senate — and send the measure to committee.

Lawmakers must then let the measure sit in committee for 30 legislative days when the House is in session, a time that can stretch into months depending on the chamber’s schedule. Lawmakers must then gather 218 public signatures on the petition — meaning at least a handful of Republicans would have to join every Democrat in publicly opposing their party leaders.

Once those signatures are collected, lawmakers must wait another seven legislative days before declaring an intent to bring the measure to the House floor for a vote. This formal notice essentially requires the speaker to then schedule a vote within two legislative days.

But given how long the process has dragged on, and the political implications of Republicans forging a public alliance with Democrats against their conference majority, it is far from guaranteed that the House tool could be used to avoid failure.

Since 2015, it has not been successfully used The House voted to reopen the federal Export-Import Bankand Republicans who joined Democrats to support the measure had the implicit support of outgoing Speaker John A. Boehner just before his resignation. But the threat of momentum behind the petition has often proved enough to force party leaders to vote on legislation they might not have otherwise considered.

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