Thursday, June 1, 2023

What happens if they don’t raise the loan limit, is there a plan in case the talks fail?

What is the fight for the debt ceiling about?

Once a routine act of Congress, the vote to raise the debt limit allows the Treasury Department to continue borrowing money to pay the nation’s already spent bills.

In recent times the vote has been used as a political leverage, a bill that needs to be passed can be juxtaposed with other priorities.

House Republicans, newly empowered in this congressional majority, refuse to raise the debt ceiling unless Biden and Democrats impose federal spending cuts and future spending restrictions.

Republicans say the nation’s debt, now at $31 trillion, is unsustainable. They also want to add other priorities, including tougher work requirements for recipients of government cash assistance, food stamps and the Medicaid health care program. Many Democrats oppose those requirements.

Biden had insisted on passing the debt ceiling without conditions, saying that the United States always pays its bills and that debt default is non-negotiable.

But facing a deadline as soon as June 1, when the Treasury said it would run out of money, Biden began talks with Republicans.

What happens if the loan limit is not increased?

A government default would be unprecedented and disastrous for the country’s economy. Yellen and economic experts have said it could be “disastrous”.

There is no plan as to what exactly will happen. But it will have far-reaching effects.

Yellen has said it would destroy jobs and businesses and leave millions of families “probably without paychecks” dependent on payments from the federal government, including Social Security recipients, veterans and military families.

Government officials estimate that more than 8 million people may lose their jobs. The economy may be in the grip of recession.

“A default could cause widespread suffering as Americans lose the income they need to survive,” he said. The disruption to federal government operations would affect “air traffic control and law enforcement, border security and national defense, and food security”.

Is there a backup plan if the talks fail?

Some Democrats have proposed that they could raise the debt ceiling on their own, without help from Republicans.

Progressives have urged Biden to invoke a clause in the 14th Amendment to the Constitution that says the legality of the public debt in the United States “shall not be called into question.” Failure, so the argument goes, is therefore unconstitutional.

Supporters of the unilateral action say Biden already has the authority to effectively eliminate the debt ceiling if Congress does not extend it, so that the legality of the nation’s debt is not called into question.

The president said Sunday that it is a “question that I think is unresolved” whether he can go it alone, adding that he expects the judiciary to try to evaluate the idea in the future.

Meanwhile, in Congress, House Democratic Leader Hakeem Jefferies has initiated a process that would “unload” the issue on the entire House floor and force a vote to raise the debt ceiling.

It’s a cumbersome legislative process, but Jefferies urged House Democrats to sign onto the measure in hopes of gathering the majority needed to vote.

The challenge for the Democrats is that they only have 213 members, five short of the 218 needed for a majority.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
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