In January, the federal government reached its $31.4 trillion cap on borrowing money, forcing Treasury Secretary Janet Yellen to implement “extraordinary measures” to keep the nation from defaulting. Some analysts hoped revenues from tax collection would give Congress more time to avert a debt ceiling crisis.
But tax season has come and gone, Treasury collected less than it expected, and Secretary Yellen now says the U.S. will default by June 1st unless Washington can come to an agreement.
That’s less than 30 days from now.
The Debt Ceiling Explained: What You Need to Know
If the debt ceiling isn’t raised by then, the U.S. could default on its debt for the first time. The consequences could be severe: a recession with six million jobs lost and a four percent drop in GDP, Social Security and other benefits could be reduced or delayed, and credit cards, mortgages, car notes, and student loans could become more expensive for everyone.
Despite a looming economic crisis, leaders in Washington have been slow to act. On April 26th, the Republican-controlled House passed a bill along party lines that couples budget cuts with a debt limit increase, but Senate Democrats and President Joe Biden have pledged they won’t allow it to pass. In fact, President Biden has yet to move off his original stance that he will only sign a “clean” debt ceiling increase that does not include other provisions like spending cuts.
President Biden and Speaker Kevin McCarthy last met about the debt ceiling on February 1st – three months ago. The White House seems to have a growing sense of urgency, as the president just invited the top leaders from the House and Senate to a meeting to discuss a way forward. If any of them are interested in a bipartisan deal – the only deal that can pass in a divided Congress – they don’t have to look far.
The bipartisan House Problem Solvers Caucus released a framework on April 19th for avoiding a debt default and getting the country’s long-term finances in order. The framework has 64 Republicans and Democrats backing it.
With the X Date moving up, now is the time for Washington to sit down and work out a debt deal.
