US Hits Debt Limit, Could Default in June

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Facts

  • The US hit its $31.4T borrowing limit Thursday, forcing Treasury Secretary Janet Yellen to begin using extraordinary cash management measures in order to postpone default until June.
  • The limit on how much the US can borrow to pay for its expenses, known as the debt ceiling, pays military members’ salaries and Medicare benefits, among other things, and is set by Congress.
  • Republicans, who took control of the House in the November midterm elections, are hoping to use a debt ceiling raise as a bargaining chip to get spending cuts from Democratic Pres. Joe Biden. Congress last voted to raise the ceiling in December 2021.
  • The Biden admin. has chastised Republicans for using the debt ceiling as a trade chip and has said it will not negotiate with the GOP. A default could crush the US economy and markets, as it would raise doubts about the country’s ability to pay its debts.
  • Tax cuts and increased spending by Congress, while controlled by each party over the past several decades, have pushed the US to this precipice. The battle between the two parties on this matter could be a sign of things to come now that Republicans rule the House, and Democrats control the White House and Senate.

Sources: Reuters, Guardian, FOX News, NPR Online News, and New York Times.

Narratives

  • Republican narrative, as provided by FOX News. The GOP has taken control of the House with a mandate on several issues, first and foremost stopping wasteful government spending, which skyrocketed during the COVID pandemic. Meanwhile, instead of negotiating, Biden is willing to dangle the economy over a cliff. The president should come to the table for the betterment of the country's present and future — when the budget will hopefully be balanced.
  • Democratic narrative, as provided by CNN Politics. There’s nothing to negotiate here. Republicans should raise the ceiling, like they have numerous times under presidents from their own party, and maintain the country’s record of always paying its debts. Spending cuts for the future won’t do anything to affect what the US has already spent. Republicans are playing a dangerous game of roulette with the economy, and Americans are going to feel pain if they don’t relent.