5/21/23

By Aditi Jha

The debt limit, also called the debt ceiling, is a limit on how much debt that the U.S. government is allowed to have. The government borrows money to pay for Social Security, Medicare, military salaries, interest on the national debt, tax refunds, and more. Prior to World War I, every time the government needed to borrow money, Congress would pass a law just for that action. But in 1917 when the U.S. had to borrow much more money for the war, Congress changed the system. Instead of passing a new law every time the government needed to borrow money, they would set a limit on how much money the government could borrow. When the government hit it, Congress could raise it. It has been raised or suspended 78 times since 1960, according to the Treasury Department.  Experts predict that the US will reach the debt limit at some point from early June to August. Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said that "Everybody uses [bills to increase] the debt ceiling for their favorite policies. The real problem here is that you now have people actually talking about defaulting." A country defaults when it cannot pay its debt any longer. In 2011, the US came very close to doing that. If the debt ceiling is not raised, then the Treasury Department would be unable to make payments. Missing a payment (which the US has never done before) qualifies as a default. If the US defaulted, it would have catastrophic consequences such as decreased investment, lots of unemployment, crashed stock markets, a recession, and a global financial crisis. President Biden and House Speaker Kevin McCarthy will meet tomorrow to talk about the debt limit. This morning, McCarthy told reporters that he had a "productive phone call" with President Biden, who was returning from the G-7 summit in Japan. "Look, he's sitting on Air Force One, he had been sitting in meetings with other world leaders, and it's hard to try to get that update as we're going across there. I think we can solve some of these problems if he understands what we're looking at, but I've been very clear to him from the very beginning; we have to spend less money than we spent last year." Some lawmakers argue that the 14th Amendment of the Constitution would allow the Treasury Department to borrow money past the debt limit. Treasury Secretary Janet Yellen told NBC that "It doesn't seem like something that could be appropriately used in these circumstances given the legal uncertainty around it and given the tight timeframe we're on, so my devout hope is that Congress will raise the debt ceiling." Yellen has repeatedly warned that the U.S. could run out of money by June 1st. This could lead to defaulting. 

After the G-7 summit, Biden said that he expects a "thaw" in U.S. relations with China due to military and economic security threats, such as the military activities in the East and South China seas and the human rights violations of ethnic minorities in Tibet and Xinjiang. He said that the US is "going to continue to put Taiwan in a position that they can defend themselves. And there is clear understanding among most of our allies that, in fact, if China were to act unilaterally, there would be a response." He said that the Chinese spy balloon was also responsible for worse relations with China, stating, "And then this silly balloon carrying two freight cars worth of spy equipment flew over the United States and it got shot down and everything changed in terms of talking to one another." 

That's the news for today! Stay safe!