Speaker McCarthy lays out initial cards in debt ceiling debate: 5 essential reads on why it's a high-stakes game
On April 17, 2023, McCarthy told a gathering at the New York Stock Exchange that the Republican-controlled House would vote “in the coming weeks” on a bill to “lift the debt ceiling into the next year.” The catch?
- On April 17, 2023, McCarthy told a gathering at the New York Stock Exchange that the Republican-controlled House would vote “in the coming weeks” on a bill to “lift the debt ceiling into the next year.” The catch?
- The Democrats would have to agree to freeze spending at 2022 levels and roll back regulations, among other conditions.
- As such, McCarthy’s comments might best be viewed as an early salvo in what could be protracted negotiations to avert a debt ceiling crisis.
1. What exactly is the debt ceiling?
- The debt ceiling was established by the U.S. Congress in 1917.
- It limits the total national debt by setting out a maximum amount that the government can borrow.
- As a result, the Treasury has taken “extraordinary measures” to enable it to keep borrowing without breaching the ceiling.
- Read more:
Why America has a debt ceiling: 5 questions answered
2. ‘Catastrophic’ consequences
- Well, pretty bad, according to Michael Humphries, deputy chair of business administration at Touro University, who wrote two articles on the consequences.
- Tens of millions of Americans and thousands of companies that depend on government support could suffer.
- The dollar’s value could collapse, and the U.S. economy would most likely sink back into recession,” he wrote.
- Read more:
If the US defaults on debt, expect the dollar to fall – and with it, Americans' standard of living
3. Undermining the dollar
- Such a default could undermine the U.S. dollar’s position as a “unit of account,” which makes it a widely used currency in global finance and trade.
- Loss of this status would be a severe economic and political blow to the U.S.
- But Humphries conceded that putting a dollar value on the price of a default is hard: “The truth is, we really don’t know what will happen or how bad it will get.
4. Can McCarthy make a deal?
- These could make it much harder to reach a deal with Biden over the debt ceiling.
- “Some of the new rules spawned by McCarthy’s concessions may appear to democratize the procedures for considering and passing legislation.
- But they are likely to make it difficult for members to get the working majority necessary to pass legislation,” Brand explained.