By Amb. Emmanuel Mwamba
USA Government May Default!
US government debt hit this level in January,2023 which means that the Government cannot legally borrow any more money!
It now stands at $31.4 trillion.
What is the US debt ceiling and what will it mean if it isn’t raised?
Government runs the risk of not being able to meet its public spending obligations
A unique rule in America’s fiscal system means that the world’s largest economy is about to run out of money.
US lawmakers have been arguing over whether to raise or suspend the so-called “debt ceiling”, which determines how much money the US government can borrow.
Treasury Secretary Janet Yellen has warned that if an impasse between Republicans and Democrats is not broken, the administration will not have enough cash to pay its debts as early as June 1.
The political stalemate over increasing it is deepening. If it is not resolved, there is a looming risk that the US government could default on its debt.The repercussions would be global and ruinous. “That is when you’re into a genuine potential financial market catastrophe situation,” says Andrew Hunter, deputy chief US economist at Capital Economics.
What is going wrong and how bad could it get?What is the US debt ceiling?
Since 1917, the US has had a law that sets a statutory limit on the total amount of debt that the Government is allowed to have. The limit was first set at $11.5bn (£9.2bn).
The ceiling is a little similar to the fiscal rules that the Chancellor sets himself in the UK, but it is set externally. “The key problem is that it is treated completely separately to the decisions on how much the government should spend and what level taxes should be,” says Hunter.
Congress passes new spending bills that will increase the debt level, but the debt ceiling is not raised until it is about to be breached.
The figure was also set as a blanket cash figure, which does not automatically change to reflect factors such as population growth or inflation, acting as a kind of gastric band.
American government debt has increased under every single president since Herbert Hoover. In response, the debt ceiling has been raised more than 100 times.
US government debt hit this level in January, which means that the Government cannot legally borrow any more money
