US close to exceeding its $31.4 trillion debt limit, a government-imposed limit on the total amount of money that can be borrowed to pay for existing statutory obligations including interest on the national debt, military pay tax refunds and Medicare and Social Security. A breach by the June 1 deadline risks an economic debacle, which could lead to a credit rating downgrade, with the effect of raising interest rates and tanking stock markets. This in turn would have a detrimental effect on retirement and savings accounts, the pace of business activity and hence employment. With the global economy exiting the post-COVID-19 recessionary landscape, a US federal government debt default would represent a blow to the financial system and the still fragile recovery in many economies could be compromised. Matters could worsen if the US federal government goes into its 22nd shutdown and government employees are put on furlough. In an effort to get lawmakers to cooperate and push for a deal to raise or suspend the debt ceiling, the White House released its own calculation of the losses that resulted: 8.3 million jobs lost, in an annual increase of real GDP. fell to 6.1%, and unemployment at 5%.
At the heart of this fiscal quagmire is a lack of bipartisan consensus on how to avoid repeating the cycles of national economic stress stemming from the debt ceiling. Some analysts believe that the ceiling is a useful tool for the US government to present a credible commitment to limit public spending, especially as it requires legislative consent, and with it, some Congress. Inspection Authority. Others argue that the limit is an “outdated system” that imposes undue restrictions on sound fiscal policy, including the requirement to meet previously legislated fiscal obligations. Either way, there is deeper reason to worry about the debt ceiling driving the economy into a “stampede of default every few years,” a limit that serves as a political tool for the party that controls the White House. is not under the control of so as to take advantage of it. disrupting the administration’s fiscal priorities and its plan to deliver on campaign promises. A major loan payment is due on June 15. Till then the government could make do with an ever-shrinking fiscal swing. However, Speaker of the House of Representatives Kevin McCarthy, a Republican, would be wise to realize that putting partisan goals and personal popularity ahead of the greater good is not something the American middle class will easily forgive in the 2024 presidential election, especially if This fragility causes a painfully intractable economic crisis.