WASHINGTON D.C. — The Biden administration and House Republicans are heading towards Thursday’s debt ceiling deadline at a standstill. With both sides refusing to budge, it looks more and more likely we will hit the debt limit.
The U.S. is a whopping $31.4 trillion in debt.
Raising the debt ceiling allows the government to pay the bills already owed, similar to how we might use a credit card to pay for bills our paycheck cannot cover.
If lawmakers do nothing, and the U.S. defaults, we don’t have enough incoming tax money to pay for things like Social Security, Medicare benefits, tax refunds, government employee salaries and veteran benefits.
Defaulting could also impact the government's credit rating.
Economists fear the worst, including a stock market crash, devaluation of our currency and a recession.
In order to raise the debt ceiling, Congress must pass a bill agreeing to increase the amount of money the government agrees to pay back, even though the government has already spent the money.
As part of his deal with some Republican lawmakers to become House speaker, Rep. Kevin McCarthy agreed to not increase the debt limit without spending cuts. But Democrats believe a debate over spending should happen during their annual budget hearings, not now. The White House has refused to negotiate with Republicans on the debt limit.
For the most conservative Republicans, not raising the debt limit is a hill they may be willing to die on.
For the first time, the U.S. may intentionally default on its debt.
There is no reason to panic just yet. The Treasury Department said it will take “extraordinary measures” to pay the bills until at least early June.
That means this battle could continue to brew for months with our economy in limbo.