What’s the story about the ‘default’ and debt ceiling in Washington

The United States cannot legally default on its debts, meeting Raising the federal borrowing limit could trigger a funding crisis for major programs.

Republican and Democratic lawmakers agree that the U.S. Constitution requires the federal government to pay back its debt, which now exceeds $31.5 trillion.This requirement, even if meeting If the US refuses to raise the debt ceiling, incoming tax revenues will be used to pay about $500 billion annually in interest owed to the country’s creditors.

“There’s a reason everyone says the debt ceiling is a bad hostage to budget negotiations,” said a centrist Republican lawmaker, expressing his personal concern about the Republican debt ceiling stance. If you don’t get what you want, everyone has to believe they’ll shoot you hostages.The Constitution says debt must be respected, so you can’t really shoot the debt ceiling.”

It doesn’t mean there is no causality meeting Refused to raise the debt ceiling. The federal government borrows money each year to cover the costs of defense and social welfare programs while waiting for tax revenue.

“If we don’t raise the debt ceiling, the federal government will have an obligation to pay interest on the debt and continue to fund mandatory spending programs like Social Security and Medicare,” said David Ditch, a federal budget analyst at the Heritage Foundation. “But that leaves little money for other programs, including food stamps, unemployment benefits, tax credits, homeland security, and more.”

If the debt ceiling is not raised this year, the US will face a shortfall between the over $6 trillion budget and the expected $4.8 trillion from tax revenues.

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The Treasury’s $4.8 trillion includes:

• About $2 trillion from income taxes.

• $1.4 trillion from payroll taxes, including Social Security and Medicare taxes.

• $370 billion from corporate taxes.

• $140 billion in excise, tariffs and tariffs.

If the government were forced to stop borrowing, it would barely cover the high end of the budget.

“Social Security, Medicare, Medicaid, National Defense, Veterans Benefits and interest alone cost $4.2 trillion,” Brian Riedl, an economic policy expert at the Manhattan Institute, recently wrote in the National Review. increase. “Excluding these popular programs, the remaining spending from programs such as food stamps, children’s nutrition, disability benefits, refundable tax credits, infrastructure, highway assistance, NIH, FDA, national parks, and national land. immediate elimination of two-thirds of: security, the U.S. Embassy, ​​NASA, federal prisons, K-12 education, Pell Grants, unemployment benefits, and disaster assistance.”

House Minority Leader Hakeem Jeffries, a New York Democrat, said enforcing such a scenario would be a real crime.

“It’s not negotiation, it’s intimidation,” he said. “On the other side of the aisle they’re essentially saying, ‘We’re going to blow up Social Security, we’ll blow up Medicare, we’ll blow up veterans benefits, or we’ll have the first catastrophic default in American history. You can even take risks.”

House Speaker Kevin McCarthy took cuts to entitlement spending such as Social Security, Medicare and Medicaid off the agenda when he met with President Biden on Wednesday for debt-limit negotiations. But he argues that borrowing money to pay off debt is unsustainable and that spending should be a top priority.

“We’re not going to default. But let me be honest for now,” McCarthy told CBS.[Default] It does not bear fruit until June. So what you have to do responsibly is sit down like two adults and start that discussion. ”

House Republicans are open to raising the debt ceiling in exchange for targeted spending cuts that will balance the budget over the next decade.

Texas Republican Rep. Chip Roy, a member of the House Liberal caucuses, told The Washington Times:

Republicans have yet to publicly announce how much cuts are acceptable, but lawmakers have proposed limiting federal spending to levels approved in Mr. Biden’s 2022 budget. These spending levels are at least $130 billion lower. meeting It opted for the quota in December when it passed a $1.7 trillion bill to fund the government through the end of September.

Defense spending alone increased nearly 10% from $782 billion to $858 billion in the 2022-2023 fiscal year.

“We want to make sure that defense spending is protected, but we also want to make sure it’s effective and efficient,” McCarthy said. “I want to see every dollar we spend, no matter where it’s spent. I want to eliminate waste everywhere.”

McCarthy’s right wing has other spending cuts in mind.

Roy said defense spending wasn’t necessarily on the table, and the $130 billion could be made up by cutting funding for domestic programs.

“This means cutting funding for the awakened and weaponized bureaucracy, which has increased significantly under the $1.7 trillion omnibus,” he said.