U.S. approaches debt ceiling

Majority Leader Chuck Schumer, D-N.Y., threatened to keep the Senate in session over the weekend to wrap up negotiations on an infrastructure deal before the August recess. Now, Treasury Secretary Janet Yellen has added another item to Congress’ list: The government’s borrowing authority is set to expire on July 31. She said Congress must either raise or suspend the debt ceiling, which currently stands at $28.5 trillion, or risk a federal default. The United States has never defaulted, partially because it has raised the debt ceiling numerous times. Yellen said she will start taking “emergency measures” such as suspending state and local government securities, starting July 30 if Congress doesn’t act.

What are the options? Republicans are lobbying for spending reforms such as cutting Social Security spending in exchange for raising the debt ceiling. Democrats could try to raise the ceiling in a budget reconciliation bill, which would not need any Republican support in the Senate. It’s not clear yet how Democrats will move forward and the extent to which the GOP will use the debt ceiling as bargaining power.

Dig deeper: Listen to financial analyst David Bahnsen’s take on the federal debt.