US debt ceiling looms over a House divided

General view of the US Department of the Treasury in Washington, DC.
General view of the US Department of the Treasury in Washington, DC.
Graeme Sloan/Sipa USA via Reuters Connect

The US government surpassed its debt ceiling early Thursday, prompting the US Treasury Department to implement a series of temporary emergency measures to avoid a US government default. What does this mean and why does it matter?

What’s the debt ceiling? It’s the maximum amount the US government can borrow to pay its bills. Essentially, the US government runs at a deficit, meaning it spends more than it makes from taxes. The US debt ceiling, created as a safeguard against overspending and overtaxation, has been raised 102 times since 1945, with the last increase raising the total amount to $31.4 trillion.

Raising the debt limit was rarely a partisan issue, until 1995, when the Republican-controlled House, led by Speaker Newt Gingrich, refused to fund President Clinton’s budget, leading to two government shutdowns. This set the scene for the ensuing political brinkmanship over the debt ceiling, which culminated in the 2011 faceoff between President Barack Obama and House Republicans, leading to the first-ever downgrading of the US government’s credit rating.

What happens if the government defaults on its debt? If Congress fails to increase the debt ceiling the US government will be forced to default on its loans for the first time in history. Not only would this shake investor confidence in US bonds, raising the prospect of a US recession, but because US debt is the cornerstone of the global economy – particularly amid the current global inflationary climate — it could also spark a global financial calamity.

So, what’s the holdup then? Politics, of course. Republicans, who hold a slim majority in the House, are refusing to raise the debt ceiling without a guarantee from the Biden administration that it will cut back on spending. (To be clear, economists say that Republican tax cuts in recent years in conjunction with Democratic spending contributed to the current deficit.) The White House, for its part, says that playing politics with something as delicate as the debt ceiling sets a dangerous precedent and has called on the GOP to greenlight an increase without pre-conditions.

What happens next? US Treasury Secretary Janet Yellen has said the agency will continue to deploy some accounting wizardry, which would buy the government time until June. If the problem hasn’t been fixed by the summer, however, the government could face a partial shutdown — and even default.

A seasoned politician, Biden will try to corral moderate Republicans into a deal. But House Speaker Kevin McCarthy — who recently underwent an embarrassing leadership vote and just scraped over the finish line — has his work cut out for him in convincing fiscal hawks in his party to come on board.

More from GZERO Media

Fulton County Superior Court Judge Robert McBurney ruled Tuesday that certifying elections is a required duty of county election boards in Georgia, and they’re not allowed to refuse to finalize results based on suspicions of miscounts or fraud.
TNS/ABACA via Reuters Connect

On Tuesday, a judge in Georgia blocked a new rule requiring that election ballots be hand-counted in the state, a change that allies of former President Donald Trump wanted. Opponents of the rule, which the Georgia State Election Board passed in September, said it would cause unnecessary delays in results and lead to avoidable electoral pandemonium.

The Media Viability Accelerator is a free web analytics platform built by Internews and Microsoft on Azure, funded by USAID and Microsoft's Democracy Forward initiative. Using Azure AI, the MVA harnesses the power of big data and machine learning to provide performance insights while ensuring that participants retain control over their data. Through the MVA, media outlets can access a multilingual tool that visualizes performance data and receive actionable insights to improve performance. Read more in Microsoft On the Issues’ latest newsletter.

Palestinians walk during the evacuation of the Jabalia refugee camp and the Sheikh Radwan and Abu Iskandar neighborhoods in the northern Gaza Strip on October 12, 2024.
Mahmoud Issa/Reuters

Israel launched a new offensive in northern Gaza earlier this month, making it even more difficult to get aid in, and the UN’s human rights office warns that the IDF “appears to be cutting off North Gaza completely.”

Prime Minister of Poland, Donald Tusk gestures while speaking during the weekly Ministerial meeting in Warsaw.
Marek Antoni Iwanczuk / SOPA Images via Reuters Connect

Polish Prime Minister Donald Tusk in recent days unilaterally suspended the right to asylum for migrants crossing into Poland from neighboring Belarus.

Andrei Belousov, Russia's Defence Minister, attends a meeting with Zhang Youxia, Vice Chairman of China's Central Military Commission, in Beijing, China, in this still image taken from video released on October 15, 2024.
Russian Defence Ministry/Handout via REUTERS

Russian Defense Minister Andrei Belousov met with China’s top civilian defense official Zhang Youxia on Tuesday in Beijing, where both sides pledged to “continue working closely” to deepen military relations.

Read: “The Empty Space,” by Peter Brook. In this thin volume, first published in 1968, famed director Peter Brook divides theater into its “Deadly,” “Holy,” “Rough,” and “Immediate” forms.

Turkish citizens disembark naval ship TCG Bayraktar carrying people evacuated from Lebanon upon their arrival at a port in Turkey's Mediterranean coastal province of Mersin, Turkey, October 10, 2024.
REUTERS/Umit Bektas

25: Over 25% of Lebanon is facing Israeli evacuation orders, which were expanded to include 20 villages on Tuesday.

Walmart is fueling American jobs and strengthening communities by investing in local businesses. Athletic Brewing landed a deal with Walmart in 2021. Since then, co-founders Bill Shufelt and John Walker have hired more than 200 employees and built a150,000-square-foot brewery in Milford, CT. Athletic Brewing is one of many US-based suppliers working with Walmart. By 2030, the retailer is estimated to support the creation of over 750,000 US jobs by investing an additional $350 billion in products made, grown, or assembled in America. Learn more about Walmart’s commitment to US manufacturing.

In this photo illustration, the Saudi Arabian Airlines (Saudia) logo seen displayed on a smartphone with an Artificial intelligence (AI) chip and symbol in the background.
(Photo by Budrul Chukrut / SOPA Images/Sipa USA)

Sir Edward Byrne, recently named the head of King Abdullah University of Science and Technology in Saudi Arabia, or KAUST, signaled that the institution will prioritize US technology and cut off ties with China if it jeopardizes its access to chips made in the US.