The U.S. on Thursday was expected to reach its borrowing limit, sparking the implantation of “extraordinary measures” to prevent the government from breaching its debt ceiling and tumbling toward default.
Treasury Secretary Janet Yellen had warned in a letter to Congress on Friday that the federal government was projected to reach its roughly $31.4 trillion borrowing limit as of Thursday, adding,”Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations.”
She said those measures would allow the government to buy time so that Congress can negotiate and pass a debt limit increase—but that bought time would likely “be exhausted before early June.”
House Republicans, newly emboldened by their five-seat majority, are positioning for a standoff. They plan to leverage the need to avoid breaching the debt ceiling to extract major spending cuts, including to safety nets like Social Security and Medicare. House GOP lawmakers insist that past Congresses and Presidential Administrations have spent too much on social programs.
“I don’t see why you would continue the past behavior,” House Speaker Kevin McCarthy (R-CA) told reporters Tuesday.
The Biden Administration, though, has said it will not negotiate on the debt ceiling, accusing House Republicans of using it as a “political football.”
“In the past there has been bipartisan cooperation to address the debt ceiling, and that’s how it should be,” said White House Press Secretary Karine Jean-Pierre on Wednesday.
Yellen has said a default could cause “irreparable harm to the U.S. economy.” Federally backed debt buttresses domestic and global markets. A failure to make good on U.S. borrowing could set off panic on Wall Street and spark millions of job losses.
“Default would needlessly plunge the country into economic chaos, collapse, and catastrophe while giving our competitors like China an historic boost against us,” said White House spokesperson Andrew Bates in a statement. “That’s why congressional Republicans—with strong bipartisan support from Democrats—avoided default 3 times under Donald Trump, without conditions or playing chicken with our credit rating. This president and the American people will not stand for unprecedented economic vandalism.”
According to analysts, the national debt increased by nearly 36% during the Trump Administration.
Bates was responding to a statement from conservative Rep. Andy Biggs (R-AZ), who wrote on Twitter, “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.”
The United States has never defaulted on its debt. But it has repeatedly come close, perhaps most notably in 2011, amid the rise of the conservative “tea party” movement in the House.
This past Friday, Secretary Yellen warned that if lawmakers fail to act, not raising the debt ceiling could cause “real harms, including the only credit rating downgrade in the history of our nation in 2011.”