Now the debate can continue in earnest.
The U.S government hit its statutory debt limit of $38.381 trillion Thursday, leaving the U.S. to take what Treasury Secretary Janet Yellen called “extraordinary measures” to pay its bills.
In a letter to congressional leaders, Yellen said such measures can stretch until “early June, and wrote that Congress will “need to act” to prevent default.
“Yet the use of extraordinary measures enables the government to meet its obligations for only a limited amount of time. It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit,” Yellen wrote, according to The Washington Post.
“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,” she said. “Indeed, in the past, even threats that the U.S. government might fail to meet its obligations have caused real harms, including the only credit rating downgrade in the history of our nation in 2011.”
The Treasury Department on Thursday was making moves that would put a hold on contributions and investment redemptions for government workers’ retirement and health care funds, the Associated Press reported.
According to the AP report, those moves would give the government the ability to handle its day-to-day expenses until roughly June.
Democrats are pushing for a “clean” bill to raise the debt ceiling, while Republicans are holding to the line that such a bill won’t come without spending cuts.
House Speaker Kevin McCarthy, R-Calif., who narrowly won that chair on the 15th ballot when the new Congress began, said a debt limit increase without spending cuts was “off the table.” He also said federal retirement spending should be reined in to save those programs from bankruptcy.
“Let’s sit down and find a place that we can protect Medicare and Social Security for the future generations. Let’s put our house in order,” he said, according to The Post. “I’d like to sit down with all the leaders, especially with the president, start having discussions. I think it’s a sign of arrogance, if you would say, he wouldn’t even discuss it.”
If the reaction from the White House is any indication, such a sit-down is a long way from happening.
White House Press Secretary Karrine Jean-Pierre used her press briefing to say the White House is “not going to negotiate on this.”
“We should be dealing with the debt ceiling without — without conditions,” Jean-Pierre told reporters.
She called the messaging coming from Republicans “another attempt … to force unpopular cuts on programs critical to seniors, the middle class and working families.”
“Congress needs to act and do so quickly. There is no excuse for political brinkmanship,” she said Tuesday.
McCarthy’s predecessor, former Speaker Nancy Pelosi, a Democrat from California, called cuts to retirement programs a “non-starter.”
“It’s almost silliness for Republicans in the House to be putting Medicare and Social Security on the table as a condition for lifting the debt ceiling,” she said, according to The Post. “Hopefully, there will be agreement that we reach in a responsible way to lift the debt ceiling.”
Even if the House does pass a bill to lift the debt ceiling, such a move would have to get through the Senate. Democrats control the Senate 51-49, but 60 votes would be needed to break any filibuster.
The debt ceiling increased two times under President Donald Trump, but the Trump administration also tinkered with the budget and the debt ceiling in other ways throughout its four years. When Trump was sworn into office in January 2017, the national debt stood at $19.9 trillion. By November 2020, the debt had increased to over $27 trillion.
The debt ceiling was increased twice (March 2017, March 2019) and suspended once (August 2019) under former President Donald Trump. It was raised seven times each by former Presidents Barack Obama and George W. Bush.
In all, the debt ceiling has been raised some 80 times since the 1960s, the AP reported.
But rather than fight over what needs to happen before the limit can be raised, some are calling for no raise at all.
“We cannot raise the debt ceiling,” Rep. Andy Biggs, a Republican from Arizona, tweeted Tuesday. “Democrats have carelessly spent our taxpayer money and devalued our currency. They’ve made their bed, so they must lie in it.”
While the exact consequences aren’t really known, the AP reported a prolonged default could be devastating.
Analysts at Bank of America cautioned in a report last week that “there is a high degree of uncertainty about the speed and magnitude of the damage the U.S. economy would incur,” according to the AP.