© Reuters. The US has reached the debt ceiling of 31.4 trillion dollars and will have to expand it, with the approval of Congress
| Gal Rekover, Devar News
The United States has reached the debt ceiling of $31.4 trillion and will have to extend it, with the approval of Congress, until June 2023 to continue to fulfill the federal budget. Republicans intend to use their majority in the House of Representatives to impose cuts.
The debt ceiling is a fiscal restriction that American law imposes on the government, it sets a maximum amount for the federal debt. Its increase is a constant need that occurs every few years with the last increase, in the amount of 2.5 trillion dollars, approved in December 2021.
According to Treasury Secretary Janet Yellen, the administration will be able to continue meeting approved spending through June through the use of so-called “extraordinary measures.” If the expansion is not approved by then, the government will not be able to raise additional debt and therefore will not be able to meet its obligations, which will likely cause a devastating and wide-ranging chain reaction in the economy.
However, it is likely that the ceiling will indeed be expanded, the question is at what political cost. Republicans, who have held a majority in the House since the midterm elections, will try to use their majority to condition the expansion on significant spending cuts. It is a kind of game of ‘who blinks first’ because neither party will want to take responsibility for the disaster that will occur if the debt ceiling is not extended.
The economic logic of the debt ceiling is controversial. Because it is denominated in a nominal amount, which does not refer to the long-term growth trend of the economy, the public debt will never reach it. Not for nothing, the uploads happened dozens of times in the past. In fact, its significant impact is political, it gives leverage to the opposition, usually a Republican opposition that wants to impose cuts.
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