What’s the deal with the debt ceiling fight?

Transcription

Nathaniel Rakich: In real estate, it’s usually a good thing for houses to have high ceilings. But a House doesn’t seem to want one.

Republicans in the US House of Representatives refuse to raise the nation’s debt ceiling unless President Biden agrees to their demands. The standoff has consumed political news coverage and halted legwork in Congress, but why is it so important? What about the debt ceiling?

The debt ceiling is the legal limit of how much money can the federal government borrow to pay your existing financial obligations. There’s a common misconception that raising the debt limit is the same as authorizing new spending, but that’s not true: it only allows the government to pay off debts it has already incurred. Think of it like paying off your credit card, not using it to buy a new fighter jet.

Currently, the debt limit is $31.4 trillion, and we are dangerously close to reaching it. Actually, technically pay it back in january, but the Treasury Department has been taking so-called “extraordinary measures,” essentially creative accounting maneuvers, to avoid defaulting on our debt. But those measures are expected to run out soon. no one knows exactly when that “date X” is, but the Congressional Budget Office has calculated that it will be in the first two weeks of june.

If the debt ceiling is not raised by then, the US will not have the legal authority to pay the expenses it has already committed to, such as Medicare and Social Security payments. In other words, the United States would be forced to default on its debt, which would have a catastrophic impact on the economy. The stock market could crash and millions of people could lose their jobs.

The only thing that needs to happen to prevent this is for Biden and the Republicans in Congress to sign into law a bill raising the debt limit, but of course that is easier said than done. Republicans have insisted that any bill raising the debt limit also include drastic cuts in spending and work requirements for recipients of government aid. Meanwhile, Biden favors a “clean” bill to raise the debt ceiling with no strings attached. Both sides have been trading furiously for weeks, but it appears that they have made little progress towards an agreement. Essentially, they are playing a game of chicken with the national economy: each side is betting that the other would rather cave in than cause economic disaster.

However, in the worst case, the United States has options. Some progressives want invoke the 14th Amendment, which states that “the validity of the public debt of the United States… shall not be questioned.” Essentially, they believe that Biden could simply quote “Mean Girls” and declare: “He [debt] limit does not exist.” But Republicans would certainly challenge this in court, making it a risky strategy.

So the fate of the national economy comes down to a staring contest between Biden and the Republicans. The only question is who blinks first. [stares at camera for uncomfortably long period of time, then blinks] Damn.