The United States government is facing a deadline of early June to raise the debt ceiling or risk defaulting on its debt.
The debt ceiling is a legal limit on how much money the US government can borrow. It has been raised 78 times since it was first introduced in 1917.
The current debt limit of $31.4 trillion was reached in January, but the Treasury Department has been using extraordinary measures to allow the government to continue financing its activities.
These measures are set to expire on June 1, after which the government can no longer borrow money to pay its bills.
If the debt ceiling is not raised, the government will be forced to prioritize spending, which could delay payments to Social Security recipients, veterans, and other government beneficiaries.
It could also lead to a government shutdown, as the government would not be able to pay its employees.
A default on US debt would have a devastating impact on the US and global economy. It would drive up interest rates, making it more expensive for businesses to borrow and invest.
It would also lead to a decline in the value of the US dollar, making imports more expensive and exports less competitive.
The impact on the global economy would be even more severe.
A default on US debt would send shockwaves through global financial markets, leading to a decline in stock prices and a rise in the cost of borrowing.
It could also lead to a recession in some countries. The stakes are high, and time is running out. Congress must act quickly to raise the debt ceiling and avoid a default that would devastate the US and global economy.
The main sticking point in the negotiations is the Republicans’ demand for sweeping budget cuts in exchange for raising the debt ceiling.
The Republicans want to eliminate tax breaks for clean energy investments and reverse Biden’s plan to forgive student loan debt.
The Democrats have refused to negotiate these issues, saying that the debt ceiling should be raised without conditions.
Biden could, in theory, invoke the 14th Amendment of the US Constitution, which states that the “validity of the public debt of the United States, authorized by law, … shall not be questioned.”
Some analysts believe Biden can argue that he has a constitutional duty to avoid default and thus can blow past the debt limit to continue Congress’s spending.
However, that move would almost certainly lead to prolonged legal wrangling, which could unsettle financial markets.
Republicans have warned that Biden cannot act unilaterally and that the solution has to come through Congress.
It is unclear what will happen next. The two sides are still negotiating, but time is running out.