US Government will Freeze American Bank Withdrawals , US debt limit: Ceiling In serious Trouble!
235The US government is facing a serious challenge with the debt limit, which has become a contentious issue in recent years due to deepening political polarization. In 2013, the debate over the limit forced the government into a shutdown, and in 2021, the issue again came down to the wire. As policymakers deliberate an increase to the debt ceiling in 2023, President Biden has stated that he will settle for nothing less than a no-strings-attached increase.
Republicans, led by House Majority Leader Kevin McCarthy, have conditioned a debt ceiling increase on reductions in federal spending. In April 2023, the Republican-led House passed a bill that would suspend the debt ceiling in exchange for cutting federal spending by almost 14 percent over the next decade. However, the bill has no chance of passing the Democrat-led Senate, and President Biden has threatened to veto the measure.
The consequences of breaching the debt ceiling could be severe. Economists have considered the once-unthinkable prospect of a U.S. default, which could lead to chaos for the U.S. and global economies. Even short of default, hitting the debt ceiling would limit the government's ability to finance its operations, including providing for national defense and funding entitlements such as Medicare and Social Security. Other potential repercussions include a credit rating downgrade, increased borrowing costs, a drop in consumer confidence, and a recession. A breach of the debt ceiling could immediately halt about one-tenth of U.S. economic activity and lead to the loss of three million jobs, add $130,000 to the cost of an average thirty-year mortgage, and increase the national debt by $850 billion. Additionally, higher interest rates could divert future taxpayer money away from much-needed federal investments in infrastructure, education, and healthcare.
In January 2023, Treasury Secretary Janet Yellen warned Congress that failure to meet the government's obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability.