(C) Common Dreams
This story was originally published by Common Dreams and is unaltered.
. . . . . . . . . .



Speaker Drama Raises New Fears on Debt Limit [1]

['Jim Tankersley']

Date: 2023-01-07

The federal government spends far more money each year than it receives in revenues, producing a budget deficit that is projected to average in excess of $1 trillion a year for the next decade. Those deficits will add to a national debt that topped $31 trillion last year.

Federal law puts a limit on how much the government can borrow. But it does not require the government to balance its budget. That means lawmakers must periodically pass laws to raise the borrowing limit to avoid a situation in which the government is unable to pay all of its bills, jeopardizing payments including military salaries, Social Security benefits and debts to holders of government bonds. Goldman Sachs researchers estimate Congress will likely need to raise the debt limit sometime around August to stave off such a scenario.

Understand the U.S. Debt Ceiling Card 1 of 4 What is the debt ceiling? The debt ceiling, also called the debt limit, is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury securities, such as bills and savings bonds, to fulfill its financial obligations. Because the U.S. runs budget deficits, it must borrow huge sums of money to pay its bills. When will the debt limit be breached? Congress passed legislation in December 2021 to raise the limit by $2.5 trillion and stave off the threat of default until 2023. Unless it is raised again, the statutory cap is expected to be reached at some point next year. Why is there a limit on U.S. borrowing? According to the Constitution, Congress must authorize borrowing. The debt limit was instituted in the early 20th century so that the Treasury would not need to ask for permission each time it had to issue debt to pay bills. What would happen if the debt limit was hit? Breaching the debt limit would lead to a first-ever default for the United States, creating financial chaos in the global economy. It would also force American officials to choose between continuing assistance like Social Security checks and paying interest on the country’s debt.







Raising the limit was once routine but has become increasingly difficult over the past few decades, with Republicans using the cap as a cudgel to force spending reductions. Their leverage stems from the potential damage to the economy if the limit is not increased. Lifting the debt limit does not authorize any new spending; it just allows the United States to finance existing obligations. If that cap is not lifted, the government would be unable to pay all of its bills, which include salaries for military members and Social Security payments.

The exception to the debt-limit drama was the four years of Donald J. Trump’s presidency, when Republicans largely abandoned their push to tie increases in the limit to cuts in federal spending. In 2021, Senate Republicans clashed with Mr. Biden as the deadline for raising the limit approached, but those lawmakers ultimately helped Democrats pass a law increasing the cap.

[END]
---
[1] Url: https://www.nytimes.com/2023/01/07/us/politics/speaker-election-debt-limit-republicans.html

Published and (C) by Common Dreams
Content appears here under this condition or license: Creative Commons CC BY-NC-ND 3.0..

via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/commondreams/