Will the Debt Ceiling Be Raised? Why or Why Not.

Source: shutterstock.com/MrIncredible

The debt ceiling deadline continues to close in on the U.S. economy as Congress remains stubbornly locked in negotiations. It remains unclear just how far things will unravel before any notable progress is made on the matter, but the likelihood of a U.S. default continues to rise with each passing day. Will the debt ceiling be raised?

Well, if history is any indicator, yes. Indeed, Congress has raised the debt ceiling 78 times since 1960, each time managing to avoid a government default. Unfortunately in 2023, however, things aren’t that simple. Currently more than 40 Republicans have committed via letter to refuse approval of any debt limit-extending legislation without “spending cuts and structural budget reform as a starting point for negotiations on the debt ceiling.”

Since the U.S. went past its debt cap in January, the U.S. Treasury Department has essentially been footing the country’s bills via its extraordinary measures powers. While some economists have differing opinions on when the Treasury will exhaust its cash balance, Treasury Secretary Janet Yellen believes the country’s purse may only have until June 1 to raise the debt ceiling, lest the country is plunged into default.

The polarized state of Congress has left economists in the lurch, forcing some to pursue bizarre means of paying down government debt payments without requiring Congressional legislation. This includes ideas like minting a $1 trillion platinum coin, reorganizing Treasury payment priorities toward social security recipients and bondholders, or even using language found in the 14th amendment to justify issuing debt without congressional approval.

Each of these ideas have been tossed around repeatedly over the past several decades, but most — including Yellen — agree “there is no good option” other than raising the debt ceiling.

Will the Debt Ceiling Be Raised?

As it stands, the left and right are stuck in stalemate. President Joe Biden and his administration have remained steadfast on passing legislation to raise the debt ceiling without conceding on hot-ticket items like spending. Should Biden agree to the Republicans’ terms, it would mean passing the long-sought legislation but likely limit Biden’s ability to pursue his agenda for much of his remaining term.

Unfortunately for Biden, the right has been uncharacteristically united on the matter. In late April, House Republicans passed legislation that would raise the ceiling but also heavily limit future federal spending and entirely cut or partially defund specific programs.

“Whenever you’ve got 41 senators who are unwilling to bring debate to a close on any legislation, it cannot pass. We’ve now got more than enough to stop exactly the kind of legislation that Joe Biden wants,” said Senator Mike Lee (R-UT)

Most expect the Congressional roadblock to sort itself out as the timer runs down to the wire, as has been the historical trend. That said, time is running out. Some are even tossing out radical notions of letting the country go into default unless Biden agrees to the suggested spending cuts.

This includes former President Donald Trump, who recently attempted to persuade Republican lawmakers to let the country default should Biden refuse to compromise on proposed spending cuts. Better than “spending money like drunken sailors,” Trump said at a recent CNN Town Hall event.

With degrees in economics and journalism, Shrey Dua leverages his ample experience in media and reporting to contribute well-informed articles covering everything from financial regulation and the electric vehicle industry to the housing market and monetary policy. Shrey’s articles have featured in the likes of Morning Brew, Real Clear Markets, the Downline Podcast, and more.

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