Debt ceiling: How is the US government running out of money and what happens next?

Congress is approaching a major deadline, with no signs of bipartisan solution

John Bowden
Monday 04 October 2021 19:11
Comments
Schumer slams Republicans for blocking government funding, refusing to lift debt limit
Leer en Español

The US government is on course to run out of ways to pay its debts in a matter of days, leaving it potentially set to default for the first time in history unless Congress can work together and pass a piece of legislation to raise the federal government’s borrowing limit.

The government is funded through 3 December thanks to a stopgap spending bill passed by the House and Senate; however, a separate deadline looms for the country’s ability to make payments on outstanding loans, payments which if not made would affect the US credit rating and could lead to a recession.

A statement from the US Treasury secretary, Janet Yellen, said that the federal government will run out of money it has already borrowed on or around 10 October; should the US Congress miss that deadline and fail to pass an extension of the debt ceiling, the government could default on its debt for the first time in history, a move that could have dire consequences for borrowing in the future.

As the Senate wars over the debt ceiling, which on Monday drew the ire of President Joe Biden, they also continue to debate the Democrats’ $3.5 trillion infrastructure package, which party leaders are hoping to pass simultaneously.

Republican leaders say no GOP votes to raise the debt limit

The GOP has remained unified on falsely claiming that the debt limit is part of a Democratic plan to borrow more money in order to fund President Joe Biden’s $3.5 trillion infrastructure plan, when in reality many agencies of government will not function after 10 October regardless of whether or not the infrastructure bills pass.

“We will not provide Republican votes for raising the debt limit,” Senate Minority Leader Mitch McConnell said recently during a floor speech. “Bipartisanship is not a light switch ... that Democrats get to flip on when they need to borrow money and switch off when they want to spend money.” Democrats voted with Republicans on several occasions to raise the debt limit when Donald Trump was president.

Mr McConnell reiterated on Monday in a letter to the White House that the Democrats should pass an extension on the debt ceiling on their own through the reconciliation measure; doing so would likely significantly alter or doom entirely Mr Biden’s $3.5 trillion reconciliation bill.

Democrats demand bipartisanship

Extensions of the debt ceiling have been largely bipartisan in years past; the longest government shutdown in history occurred over the winter of 2018-2019, when for just over 30 days the federal government was paralysed by former President Donald Trump’s demand that any bill to fund the government include billions of dollars meant for the construction of a wall along the US-Mexico border.

The election of a Democratic-led Congress led to the end of that shutdown, with the House and Senate passing bills to fund the government that did not include border wall funding and the president opting instead to declare a national emergency and reallocate funding himself.

On the debt limit, Democrats are hoping to avoid using reconciliation to raise the debt limit.

“Going through reconciliation is risky to the country and is a non-starter,” Senate Majority Leader Chuck Schumer said on Tuesday at a news conference.

“Going through the long, convoluted, difficult reconciliation process with debt limit is very, very risky,” Senate Majority Leader Chuck Schumer has said, adding: “We’re not pursuing that.”

As the two parties play chicken, the deadline for raising the debt limit and preventing thousands (if not more) federal workers from going without a paycheck looms less than two weeks away.

In his own address on Monday, Mr Biden made clear that Republicans were refusing to pay debts that they themselves were responsible for incurring; he pointed to $8 trillion added to the debt under the Trump administration as evidence.

“They’re responsible for more than $8 trillion in bills from the previous administration,” said Mr Biden.

“Folks watching at home, you should know that this is the Republican position. Here it is: Republicans won’t raise the debt limit to cut their own spending,” he added.

Government facilities would close during a crisis

A debt default could have disastrous impacts on federally funded facilities, including public parks and other federal buildings.

Amid debate over a government-funding bill, which did ultimately pass both houses of Congress, career public servants expressed frustration over the federal government teetering between crises.

One official with the Centers for Disease Control (CDC) expressed exasperation over Congress’s inability to reach a deal (so far) in the midst of a major public health crisis in a statement to The Washington Post.

“Come on, government leaders, can you guys work just as hard [as] we’re working so the government can keep functioning?” they said. “We’re trying to get our shit together, couldn’t you get your [s***] together, too?”

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in