U.S. government touches debt ceiling amid Republican-Democratic impasse
White House (Reuters) - In the midst of a political impasse between President Joe Biden's Democrats and the Republican-controlled House of Representatives that may cause a fiscal crisis in the coming months, the U.S. government was set to reach its $31.4 trillion borrowing limit on Thursday.
Republicans hope to force spending cuts from Biden and the Democratic-controlled Senate using the congressionally required federal debt ceiling in order to gain a majority in the House.
Now, begin trading.
Now, begin trading.
The deadline on Thursday won't have much of an immediate impact because Treasury officials are ready to start using emergency cash management strategies to prevent default. Nearer to June, as the government approaches the 'X date,' after which the Treasury would run out of emergency measures, more serious problems will start to surface.
Ahead There was no indication that either party would budge on that date.
"It is something that ought to be carried out without hesitation. Negotiating outside of it is not appropriate. Congress' main obligation is to accomplish that "Karine Jean-Pierre, the press secretary for the White House, said reporters.
Instead, Republicans are seeking a "debt prioritization" strategy that would urge the Treasury to give debt payments—and perhaps other programs like Social Security and Medicare—priority in the event that the ceiling were to be exceeded during negotiations—in an effort to prevent default. By the end of March, Republicans expect to get the measure finished.
Risk-taking has sparked worries in Washington and on Wall Street about a bloody battle over the debt ceiling this year that could be at least as disruptive as the protracted battle in 2011, which resulted in a downgrade of the U.S. credit rating and years of forced domestic and military spending cuts.
We won't let the debt fall into default. We are able to handle interest payments and servicing. Rep. Chip Roy, a prominent conservative, told Reuters that we should not heedlessly raise the debt ceiling.
Roy dismissed worries about volatile markets and the possibility of a recession.
"They consistently say that. In an interview, Roy observed, "It happens like clockwork. "A recession is already on the horizon. The question is what it will look like if monetary policy and fiscal policy don't save us from our ignorance in spending so much money.
The legislative cap on the amount of debt the government can issue was established by Congress in 1939 with the intention of preventing further increase. The action hasn't had that result As a result, Congress has always regarded the annual budget process, which involves selecting how much money to spend, separately from the debt ceiling, essentially agreeing to pay the expenses of spending that has already been approved.,