Hardworking American citizens have been paying higher taxes under the new administration, but politicians have kept spending, and the federal debt has hit its ceiling quickly.
The United States federal debt ceiling was reinstated after a congressional suspension of the debt limit expired on Sunday, Aug. 1, Washington Examiner reported.
The debt limit was paused at $22 trillion in 2019, and Congress at that time voted to suspend the federal debt limit for two years. That suspension expired at the weekend, with an increase in the federal debt limit to about $28.5 trillion, after the House failed to raise the ceiling and have now left for their August recess.
Without the ability to issue debt over the limit, the Treasury Department is eyeing “extraordinary measures” to keep the country temporarily from defaulting.
On Monday, August 2, Treasury Secretary Janet Yellen announced that her department had suspended investments in retirement services for civil servants and postal workers in a letter to Congress.
However, Yellen is unsure how long the Treasury would maintain these measures to buy more time for Congress to address the issue, One American News Network reported.
“It’s like a game of chicken. We see in the U.S. two cars heading towards each other like they’re gonna crash. One car has to swerve first, otherwise they’ll crash,” she explained. “So we’re gonna see instead, both sides pulling away at some of their demands, probably postponing certain things, trying to negotiate and see which side wins first.”
Yellen urged Congress to act as soon as possible to protect the credit of the United States.
If Congress fails to act to raise or suspend the debt ceiling, the country could fall behind on its obligations or fail to pay the debt, which could have catastrophic effects on global financial markets.
Raising the debt cap took place many times during periods of tension in the past. Still, the context becomes different now when the federal spending has increased massively over the course of the COVID-19 pandemic though taxes have been raised since President Joe Biden took office.
The intensity has ratcheted up a notch, as Congress has been closely divided. The 50-50 split Senate will need to have 10 Republicans join with all Democrats to increase or pause the ceiling by overcoming the filibuster.