Time is running out for Congress to raise or suspend the debt ceiling before the U.S. government runs out of cash to pay its bills.
Lawmakers missed a Saturday deadline to extend the nation's borrowing limit, automatically reinstated after two years in place at the beginning of August.
which hit $22 trillion in August 2019 is the federal maximum limit on the total amount of debt that a federal government can borrow on behalf of the public, according to the Economic Times. Once suspended, the new limit was reinstated around $28.5 trillion, a figure that includes debt held by the public and government.
On Monday the Treasury Department began deploying so-called extraordinary measures to ensure the government can continue paying its obligations for the time being. Nevertheless, if the debt ceiling is not raised or suspended, the US government can no longer issue debt and will soon run out of cash to hand.
The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future, exacerbated by the heightened uncertainty in payments and receipts related to the economic impact of the pandemic, Treasury Secretary Janet Yellen wrote in a recent letter to Congress.
The Nonpartisan Congressional Budget Office estimated at the end of July that the government would likely run out of money to pay its bills sometime in the fall, probably October or November. The new debt ceiling, which will include the new spending approved by Congress in the past two years, will likely be around $28 trillion, said CBO.
It's unclear how or when lawmakers intend to raise or suspend the debt limit.
Senate Minority Leader Mitch McConnell announced recently that he doesn't expect any Republican senators to vote for raising the debt ceiling meaning that unless Democrats can win over at least 10 Republican senators in order to bypass the 60 - vote filibuster, they will need to raise the debt limit in their $3.5 trillion reconciliation bill.
Can't imagine there will be a single Republican voting to raise the debt ceiling after what we've seen, McConnell said in an interview with Punchbowl News published last week.
Democrats slammed McConnell for suggesting that Republicans will play brinkmanship with the nation's debt and federal spending.
This debt is Trump debt, Senate Minority Leader Chuck Schumer has said in remarks on the House floor. Democrats joined to do the responsible thing during the Trump administration three times and the bottom line is that Leader McConnell should not be playing political games with the full faith and credit of the United States. If the U.S. failed to raise or suspend the debt limit, it would eventually have to default on some of its obligations, which could have serious and negative economic consequences. Interest rates will likely increase, and demand for Treasuries would drop; even the threat of default can cause borrowing costs to spike.
Failure to increase debt limit would have catastrophic economic consequences, Yellen told lawmakers in June.
While the U.S. has never defaulted on its debt before, it came close in 2011 when House Republicans refused to pass a debt ceiling increase, prompting Rating agency Standard and Poor's to downgrade the U.S. debt rating one notch