If the debt ceiling will not be increased in the meantime the US could potentially default on its debt ceiling on June 1.
The United States government has less than a month to pass the legislation to hike or suspend the debt ceiling. As they say “When America sneezes the world catches a cold”, the US debt ceiling crisis will lead to economic catastrophe across the globe. US treasury secretary Janet Yellen has warned of very disastrous consequences if US Congress failed to raise the debt ceiling.
For all kinds of expenses, the government borrows loans from banks, But the US has set a limit on this borrowing, which is famously called a debt ceiling. This debt ceiling is the limit on how much money the federal government can borrow, and the current US debt ceiling is $31.4 trillion. And US government is about to hit this limit very soon, and they would not be able to borrow money beyond this limit & government will then run out of money, which may lead to very dire consequences.
The government will not be able to pay the salaries of federal employees and military personnel. social security and another necessary spending will also be affected due to debt default. Various national agencies would go into the crises. So, there is an exigency to raise the debt limit, but this seems very difficult as there is a spate of differences between Democrats and Republicans.
On Tuesday an important meeting was held between US President Joe Biden and House and Senate leaders of both parties. The topic of their discussion was focused on raising the debt ceiling and budget priorities, but there had been various disagreements between both Republicans and Democrats, and the meeting ended with no conclusion. Republicans have pushed to cut budgetary expenses. This always disagreeing politics between Democrats and Republicans may put the US economy on the brink of collapse this time.
As the US treasury secretary noted that failure to take appropriate measures and action will lead to constitutional crises. There should be a consensus between both parties on this matter as it is time to go beyond politics and come together to solve this severe problem. Experts believe that the financial market will face trouble and the stock market will be tumbled if extraordinary steps would not taken.
What led to this debt crisis in United States
Increased government spending on various things like Medicare and social security, and tax cuts are the main reasons for this increased debt. Widespread unemployment during covid-19 lockdown and its aftereffect caused a decrease in tax revenue which have also put a burden on the national debt. Government borrowing has also increased throughout time for many other expenses during the period of economic growth.
War in Ukraine has led to greater military spending, which has been one of the main factors in this debt crisis. Rising inflation has contributed to a decrease in common citizens spending which has forced the US government to spend more on public interest spending. So, all these factors have played an evident role in this infamous debt crisis.
Now America must deal with this very crisis. US Congress has to take appropriate action to deal with this problem. To keep the Country’s economy running leaders of America should make extraordinary plans to tackle this issue of debt default.