Understanding the US Government Debt Ceiling and Consequences of Ignoring It

America is teetering on the brink of a financial abyss. About 3 months ago, the US Treasury warned that the government had reached its maximum debt limit and the department was taking “emergency measures” to withhold bill payments.

Did the British newspaper The Guardian explain the report that talked about the US debt ceiling and its importance? Where does the money from the US budget go? Why didn’t Republicans and Democrats reach an agreement on the budget?

What is the US debt ceiling?

The US National Debt Ceiling is the maximum amount the US government can borrow to pay for its financial obligations under the budget, such as Social Security and Medicare payments.

The United States spends more than it gets, so it borrows, and to borrow, the US Treasury issues securities, such as government bonds, which eventually return with interest.

But once the US government reaches the maximum limit, the US Treasury can no longer issue bonds, so the debt limit must be increased.

Congress is responsible for raising the debt ceiling, which currently exceeds $31 trillion.

Where does the money from the US budget go?

Most of the US Treasury money goes to support spending programs such as Social Security and Medicare, which make up almost half of the total annual budget, after which military spending takes up the bulk.

Why didn’t they raise the ceiling of the US budget?

Republicans and Democrats in the US Congress failed to reach an agreement on the debt ceiling. At the end of April last year, the Republicans passed in the House of Representatives a bill to raise the debt ceiling by $1.5 trillion, but it included spending cuts of $4.8 trillion. .

For their part, the Democrats refused to negotiate spending cuts and said that Republicans should demand spending cuts when discussing the budget, not the debt ceiling.

Biden warns!

Yesterday US President Joe Biden warned that a US default would create hardship and problems affecting all parts of the world and said during his attendance at the forum in New York: “If we don’t pay our debts, the whole world will be in trouble.” .”

In January last year, the US Treasury notified Congress that it was beginning to apply “extraordinary measures” as a result of raising the debt ceiling to $31.381 trillion.

And US Treasury Secretary Janet Yellen has warned that the government will not be able to continue to meet all of its obligations by June 1, 2023, unless a decision is made on the national debt ceiling.

Source: Guardian