The Urgent Need to Raise the US Debt Ceiling: What’s at Stake if a Deal Isn’t Reached
President Joe Biden met with Republican House Speaker Kevin McCarthy on Monday to discuss raising the country's debt ceiling, which limits how much the federal government can borrow to pay its accounts.[0] The debt ceiling currently stands at $31.4tn, and the US government could default on its obligations for the first time in history if it is not raised. The Treasury Secretary, Janet Yellen, has warned that the US could stop paying its debts as early as June 1, although that date could still slide in either direction.[1] Biden has said he is “considering” using the 14th Amendment, which gives him the authority to unilaterally address the matter of the country's debt, to circumvent the debt ceiling, though he cast some doubt on whether it could work.[2]
At least 11 Senate Democrats are urging Biden to invoke his constitutional authority under the 14th Amendment to raise the nation’s debt limit without having to go through Congress.[3] Some lawmakers in the House, including Congressional Progressive Caucus Chair Pramila Jayapal, Representative Ilhan Omar and Representative Greg Casar, have called on Biden to choose a solution invoking the 14th Amendment of the Constitution over a bad deal.[3] Biden is facing angst from his party's left flank over his entertaining some GOP demands, such as stricter work requirements for federal aid programs.[4]
Despite President Biden's appeal for a “clean” debt ceiling hike that would allow the government to meet its financial obligations beyond an imminent deadline, which could be as early as June, Republicans have insisted on substantial cuts to federal agency spending limits and other measures to diminish yearly deficits.[5] Following several months of inactivity, the White House and McCarthy have come to an agreement to commence talks regarding a probable spending agreement that would coincide with an augmentation of the borrowing threshold.[5]
An important unresolved issue is if Biden and McCarthy can come to an agreement that can garner enough votes to be approved by the Republican-dominated House and the Democratic-controlled Senate within a brief timeframe.[6] If a bill is passed with mostly Democratic votes in the House, will McCarthy face an uprising from his hard-line members?[4] The Republican caucus is experiencing tension over the call for more aggressive budget reductions, as some conservatives are concerned that McCarthy may be inclined to make a compromise with Biden that falls short of their expectations.[4]
The clock is ticking fast to discover a resolution.[7] If the US government does not increase the debt limit, it will experience its first-ever default on payments, resulting in potential catastrophic outcomes. In the event of a government shutdown, federal employees would face furloughs, international stock markets would experience a significant decline, and the American economy would likely enter a recessionary period.[7]
The mere prospect of default threatens to breed economic turmoil long before the Treasury Department actually runs out of cash.[8] Some concerning scenarios include the potential for Fitch Ratings and Moody's Investors Service to consider reviewing the country's credit if the government comes too close to default.[8] In 2011, a similar standoff between House Republicans and President Barack Obama prompted S&P to lower its rating of US debt, sending the Dow plummeting and ultimately costing taxpayers more than $1 billion in higher borrowing costs, according to the Government Accountability Office.[8]
0. “Biden and McCarthy resume talks as US debt ceiling deadline looms” Al Jazeera English, 23 May. 2023, https://www.aljazeera.com/economy/2023/5/23/biden-and-mccarthy-resume-talks-as-us-debt-ceiling-deadline-looms
1. “After debt ceiling meeting today with Biden and McCarthy, Speaker expresses optimism” CBS News, 23 May. 2023, https://www.cbsnews.com/news/debt-ceiling-meeting-today-joe-biden-kevin-mccarthy-white-house/
2. “Biden considers invoking 14th Amendment to fend off looming debt ceiling crisis” The News Journal, 21 May. 2023, https://www.delawareonline.com/story/news/2023/05/21/president-biden-14th-amendment-address-debt-ceiling/70240926007/
3. “Debt ceiling: Why is Biden being asked to invoke the 14th Amendment? – POLITICO” POLITICO, 19 May. 2023, https://www.politico.com/news/2023/05/19/14th-amendment-biden-debt-ceiling-00097932
4. “Biden and McCarthy to meet as debt ceiling deadline looms” NBC News, 22 May. 2023, https://www.nbcnews.com/politics/white-house/biden-mccarthy-meet-debt-ceiling-deadline-looms-rcna85524
5. “Talks on a Spending and Debt Deal Come to a Halt” GovExec.com, 19 May. 2023, https://www.govexec.com/management/2023/05/talks-spending-debt-deal-come-halt/386577
6. “President Biden and Speaker McCarthy met Monday to continue debt ceiling talks” NPR, 22 May. 2023, https://www.npr.org/2023/05/22/1177437014/biden-and-mccarthy-gear-up-for-the-next-round-of-debt-ceiling-talks
7. “What is the US debt ceiling and what will happen if it is not raised?” The Guardian, 30 Apr. 2023, https://www.theguardian.com/business/2023/may/16/what-is-debt-ceiling-limit-explainer
8. “Debt ceiling meeting ends without a deal despite looming deadline” The Washington Post, 22 May. 2023, https://www.washingtonpost.com/business/2023/05/22/debt-ceiling-biden-mccarthy-meeting/
