The debate over negotiations to raise the debt ceiling in Washington seems far from everyday life, but if no deal is reached, Americans could face dire consequences.
millions of people in the United States depend on benefits that cannot be paid, and Services that may be interrupted or discontinued entirely If the government cannot service its debt for an extended period.
Government officials estimate that if the US economy collapses due to default, more than 8 million people could lose their jobs.
as well as millions of Social Security recipients, Veterans and military families may lose their monthly payments.
If workers are unable to receive their government paychecks, federal services including border control and air traffic control may be disrupted.
The economy may be in the grip of recession.
President Joe Biden and top congressional leaders from both parties met at the White House last Tuesday, their second such meeting in as many weeks, to try to resolve it.
What’s the problem with the credit limit?
If the US government’s statutory borrowing limit, which currently stands at $31.4 trillion, is not extended or suspended by June 1, it could result in financial chaos.
The inability to borrow money to continue paying government obligations can mean business failures, a collapse in financial markets, and a harsh economic crisis.
The loss will be economic, but the cause will be political. Because of the lack of agreement between Republicans and Democrats.
Why is there no agreement on the debt ceiling?
The answer can be summed up with the following phrase: Philosophical differences with financial consequences.
Republicans want cuts in exchange for raising the debt ceiling, saying the current pace of spending is unsustainable.
Biden and Congressional Democrats want the debt limit to be raised unconditionally Arguing that the two issues should not be linked.
Biden previously said he would not negotiate his position on extending the debt ceiling, but would speak separately with House Majority Leader Kevin McCarthy on the federal budget.
What is the debt ceiling and why would it be disastrous if the US can’t make its payments?
What about budget?
First: Budget is not debt.
The budget is the money the government receives and spends each year. If you spend more than you take in, you run a deficit that adds to the debt that’s basically been building up forever.
Biden challenged McCarthy and asked him to come up with a budget plan.
House Republicans responded by narrowly passing a bill to reduce the deficit by $4.8 trillion over 10 years.
It would do this by reducing discretionary spending to 2022 levels and imposing a 1% annual cap on future increases.
The bill would also recover billions in unspent COVID-19 funds, eliminate the clean energy tax credit that Biden signed into law last year, and will reverse your student loan forgiveness and payment plan, But not all deductions are specified.
It’s unclear how Democrats can raise the debt limit without the support of House Republicans.
But Democrats say the unspecified budget cuts in the GOP bill will hurt people and the economy — as will likely cut domestic spending.
Moody’s Analytics estimates The Republican bill would result in 780,000 job losses over the next year alone.
Are there ways to agree on a debt limit?
In addition to repurposing unspent COVID-19 funds, the White House and House Republicans could agree to toughen some requirements for federal aid programs that benefit those in need.
Over the weekend, Biden appeared to rule out changes to Medicaid. The White House said it would reject proposals that deny people health coverage or push them into poverty.
Who will suffer the most if there is no agreement on the debt ceiling?
Basically everyone, because in the words of Treasury Secretary Janet Yellen, the blowback would be “devastating” for the US and global financial systems.
But workers, who live paycheck to paycheck, and those who depend on government benefits and services, will face the biggest hit through job and income loss.
What will happen?
Nobody knows. However, Mitch McConnell, leader of Republican senators, said after a meeting at the White House last week: “The United States is not going to default on its debts. It never was and it never will be.”
Social Security and Medicare payments will be affected: Consequences of exceeding the loan limit