The US Treasury Department has begun taking extraordinary measures to pay the nation’s bills after reaching a limit on how much it’s allowed to borrow. The Treasury Secretary, Janet Yellen, said that she would suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund, which would prevent the government from adding to its debt. There have been talks about increasing the debt ceiling, which refers to the maximum amount the U.S. government can spend on its existing obligations, including Social Security and military salaries.
Talks About Increasing the Debt Ceiling
As per details, the government has a cap of $31.4 trillion on how much it can borrow and has already reached that limit. Yellen has told the key congressional leaders to increase the government’s debt ceiling, which has been done 78 times since 1960. But the political debate on the debt ceiling has often intertwined with heated discussions over future spending, leading to a standoff as spending approaches the debt ceiling.
Rep. Andy Biggs, R-Ariz, tweeted, “We cannot raise the debt ceiling. Democrats have carelessly spent our taxpayer money and devalued our currency. They’ve made their bed, so they must lie in it.” Yellen said in a letter to lawmakers, “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
What Happens if the U.S Defaults On its Debt?
According to the Government Accountability Office, the U.S government has not defaulted on its debt, but the debt ceiling has been raised 22 times from 1997 to 2022. Once the debt limit is reached, the Treasury can’t sell any more bonds and other securities to pay off the debt from previous deficits, and that’s when the national debt strikes. As a result, the U.S. credit rating would almost certainly be downgraded, and interest rates would broadly rise for many consumer loans, making products like auto loans and mortgages more expensive for families who are subject to interest rate changes or taking out new loans.
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