President Joe Biden and House Speaker Kevin McCarthy discuss the debt limit of the United States budget as its debt piles up almost to the point of not being able to be paid for. This meeting is happening today, May 22, 2023. However, we first need to explain what led up to this point.
A little history
The debt ceiling is the amount of money the government can borrow. It was enacted after World War One to issue bonds (money borrowed from you that the government will pay back later with interest, the additional money that built up from the original payment) so that the war effort could be financed.
This, however, caused several problems. First, it is important to understand that the United States has fluctuated in public debt since the early-1800s. Since 1835, the last time the government was clear of debt, public debt only increased.
The initial plan sounded reasonable, keeping the government from borrowing too much money from the people. However, a problem occurred when the government spent too much money, reaching the limit they set. What should the government do when that happens? Their solution was to increase the debt ceiling. Since 1960, the debt ceiling has been raised 78 separate times.
There are even concerns about the debt ceiling going against the fourteenth amendment.
So what happens if the debt ceiling is reached?
According to CFR, several political consequences include; a downgrade by credit rating agencies, increased borrowing costs for businesses and homeowners alike, and a dropoff in consumer confidence that could shock the U.S. financial market and tip the economy into recession.
Remember that the debt ceiling is the money the government can borrow from the people. If the debt ceiling were to be breached, the country would default, which means they fail to pay its debt. It's like if you worked and expected to be paid but never got your check because your employer lost all the money to pay you. It wouldn't be very fun.
The Now
Right now, our debt ceiling is at $31.4 trillion. We hit that ceiling back in January of 2023.
McCarthy believes that we should not raise the taxes on the rich or close tax loopholes that oil and pharmaceutical companies tend to exploit, instead believing that cutting government spending would be a wiser option.
They are trying to find common ground with less than ten days left when this article was written until the deadline. This is difficult, however, as Republicans believe the spending limit should be brought down to the previous limit in 2022, while Democrats aim to keep the spending limit as is.
Republicans also believe that military spending should increase, decreasing domestic spending.
For now, we are waiting for further news.