No progress on debt ceiling after White House meeting as U.S. inches closer to default
Representatives of President Joe Biden and congressional Republicans ended another round of debt ceiling talks on Tuesday with no signs of progress as the deadline to raise the government’s $31.4 trillion borrowing limit or risk default ticked closer. Arizona Horizon spoke with Jim Rounds, President of Rounds Consulting, about the consequences.
What is the Debt Ceiling?
“Believe it or not, the federal government spends more than it brings in. Overtime, that accumulates and you have a national debt. The debt ceiling is basically the legislated level where you can’t borrow beyond a certain amount. You can’t go into debt a certain amount,” Rounds said.
The nation has hit such a high level being at over $30 trillion, so the government now has to raise the debt ceiling to pay for what they have already spent. This raises the question: where does money for future spending come from?
The debt ceiling needs to be raised because if that money is being spent to pay for previous expenditures and more cannot be borrowed, then that means essential payments cannot be made after the June 1st deadline. Some of these essentials include government payments to retirees, military pensions, etc., and many other places where people receive federal income.
However, the issue is being used right now at a very bad time in the business cycle, according to Rounds.
“We can’t afford a shock like this where all of the sudden the U.S. indicates we might not start paying people that loaned us money,” Rounds said.
The June 1st deadline sets a target for people’s expectations concerning whether or not the things that need to get done will get done. “This is such a big deal, it’s that extreme. It could cause a recession. It could cause millions of job losses, It’s gonna cause hardship among every day people not getting their payments, not being able to service their debt because they’re not getting their payments from the federal government, so it just keeps impacting more and more people” Rounds said.