The United States government is approaching the legal limit for the amount of debt it can take on. Treasury Secretary Janet Yellen warned in a letter to members of Congress that this debt ceiling will be reached next Thursday. With “extraordinary measures,” the money can still be spent for a while, but it calls on political leaders to agree quickly to increase that cap.
For now, Republicans refuse to agree to a higher debt ceiling. They are calling on Democratic President Joe Biden’s administration to cut government spending in exchange for such a commitment. After last fall’s midterm elections, the Republicans control the House of Representatives and the Democrats control the Senate.
Biden accused the Republicans of committing a “hostage act” and calls on them to raise the debt ceiling without delay. Democrats point out that this happened several times under Biden’s Republican predecessor, Donald Trump.
Currently, the US Treasury is just under $31.4 trillion in debt. The government is currently about $78 billion away from that.
Economists believe the Treasury will run out of cash in August if the ceiling is not raised. Wall Street analysts expect that if the situation remains as it is, panic will not arise until the second half of this year, because special accounting measures will provide relief for the time being.
Yellen warned in an earlier dispute with Republicans over the debt ceiling that federal employees and subcontractors could no longer pay without a raise. The government is also no longer able to provide benefits. In addition, the United States is likely to default on its obligations to bondholders.
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