U.S. Hits Debt Ceiling Amid Standoff Between Republicans and Democrats

The U.S. government hit its $31.4 trillion borrowing limit on Thursday, amid a standoff between the Republican-controlled House of Representatives and President Joe Biden’s Democrats that could lead to a fiscal crisis in a few months.

Treasury Secretary Janet Yellen informed congressional leaders including House Speaker Kevin McCarthy that her department had begun using “extraordinary cash management measures” that could stave off default until June 5.

Republicans, with a newly won House majority, aim to use the time until the Treasury’s emergency maneuvers are exhausted to exact spending cuts from Biden and the Democratic-led Senate.

Yellen warned that the June date was subject to “considerable uncertainty” due to the challenge of forecasting payments and government revenues months into the future.

“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” Yellen told congressional leaders in a Thursday letter.

But there was no sign that either Republicans or Biden’s Democrats were willing to budge.

Republicans are pursuing a “debt prioritization” plan that would seek to avert default by urging the Treasury to prioritize debt payments, and possibly other priorities such as Social Security and Medicare, should the limit be breached during negotiations. Republicans hope to complete the legislation by the end of March.

Brian Deese, director of the White House National Economic Council, on Thursday emphasized the risks of the uncertainty over whether the United States will honor its debts to the country’s own economy, as well as its global standing.

“This is not that complicated. This is not about new initiatives or new opportunities. This is about meeting the obligations that this country has already made,” Deese said in an interview with CNN.

Reuters/Shakirat Sadiq