Let’s talk about the US debt ceiling today!
US President Biden and House Speaker McCarthy recently had some "productive" negotiations on this crucial issue. But they still haven’t reached a deal to avoid a looming debt default.
Now, let’s dive into what the US debt ceiling is and why it matters.
The US debt ceiling sets a limit on the amount of federal debt the US government can incur. It’s like a financial cap!
Did you know since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents? The debt limit was increased twice in 2021.
It’s a way to allow the government to borrow more money when needed. But what happens if the US defaults on its debt?
This has never happened before so it is not entirely clear. US Treasury Department says if the US government defaults on its legal obligations and it would precipitate a financial crisis for the US.
It would also have a ripple effect on the rest of the world. Higher borrowing costs and interest rates can impact economies worldwide.
It’s a situation we definitely want to avoid!