Debating a debt ceiling deal

MARY REICHARD, HOST: Coming up next on The World and Everything in It: the debt ceiling.

House Speaker Kevin McCarthy visited the White House yesterday to try to hash out a debt ceiling deal with President Joe Biden.

MYRNA BROWN, HOST: WORLD’s Leo Briceno reports from Washington on what’s really at stake in the national debt debate.

LEO BRICENO, REPORTER: The United States has borrowed $31.4 trillion dollars to finance its deficit spending. Republicans say enough is enough.

House Speaker Kevin McCarthy

MCCARTHY: The first question is if the president wanted to continue reckless spending or find a way that we could be responsible, sit down and find common ground where we put ourselves on a path to budget, make a balanced budget

Earlier this month, the government hit the limit of how much money it is legally allowed to borrow. Without the ability to draw more funds, it is a matter of time before the government defaults on its debt. U.S. Treasury Secretary Janet Yellen.

YELLEN: We can't default and we will take every measure possible to work with Congress. I believe members of Congress will understand that this is, would impose a self-imposed calamity on the United States and the world economy … 

Before long, lawmakers will have to decide whether to increase, suspend, or completely remove the debt limit, or ceiling. Raising the ceiling doesn’t make room for more expenditures. Instead, it allows the U.S. to cover the costs of spending that has already happened.

Here’s Yellen again:

YELLEN: Congress needs to understand that this is about paying bills that have already been incurred by this and past Congresses, and that it’s not about new spending.

For now, the United States is continuing making the country’s payments through what Treasury Secretary Janet Yellen calls “extraordinary measures.”

These can keep the country afloat until June or July. But eventually the country will hit an “X-date”—the date of default.

No one knows concretely when that date is, but Yellen has said that defaulting on the United States’ debt would be disastrous for the economy, and would likely send the U.S. into a recession.

House Speaker Kevin McCarthy and many of the Republicans in the chamber oppose raising the debt ceiling without first seeing some cuts to the federal budget. Just a month ago, McCarthy promised members of his own party he would fight efforts to hike the ceiling. President Biden calls that a nonstarter.

BIDEN: And the very notion that we would default on the safest most respected debt in the world is mind-boggling! I’m not going to get into their reckless threats to take the economy hostage in order to force an agenda that’s only going to limit American workers and weaken us internationally. I won’t let that happen.

As the nation’s debt goes up, so do the required interest payments. The Congressional Budget Office estimates the U-S will pay $400 billion dollars in interest this fiscal year. That’s roughly $3,000 dollars per household. At this pace, the annual interest payment could reach $1 trillion by 2033. Jared Pincin is an associate professor of economics at The King’s College.

PINCIN: If Congress decides to go down that route, then they have to figure out how we’re going to cut spending or raise revenue or both. So if they just say ‘hey no, we’re not going to raise it’ and do nothing else, that is also a problem. Let’s just say, for the sake of argument, they would raise the debt limit by four trillion dollars. If they do nothing else, that means we’re having this exact same discussion three and a half years from now.

House Republicans argue that the only way to address the United State’s climbing debt in the long term is to reduce the cause: expenditures that exceed revenue. Last year, the government spent $1.2 trillion more than it brought in.

PINCIN: So if there’s not an actual discussion of the trajectory of where debt is going, it’s just a repeated question. I don’t want to use the word ‘crisis,’ but a repeated discussion of how we have to handle it. And politicians like to do that because the next election is, you know, years away versus the decision now. But at some point, you can’t keep doing that.

Reporting for WORLD, I’m Leo Briceno.

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