The United States achieved its current debt ceiling of 31.4 trillion dollars. Despite what it may seem, the situation is not new and that limit to the money that the country can legally borrow has been raised 78 times since the year 1960. So what happens now?
«This letter serves to notify you of the extraordinary measures that the Treasury has begun to take today,» wrote the US Treasury Secretary, Janet Yellento the leaders of both houses of Congress to explain how the Administration will try to avoid a default on the national debt in the coming months.
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These measures include suspending, until June, payments to the pension fund for public workers that are not immediately needed – payments that must be made when the debt ceiling is lifted or suspended.
are also suspended payments to the health service of retirees of the Postal Service.
The adjustments are intended to prevent, at least for the next few months, the country from defaulting on its public debt, something unprecedented in history.
But if Congress, whose control is divided between conservatives -House of Representatives- and Democrats -Senate- does not agree to raise or suspend the ceiling, the country will be forced to default on its debts, which could trigger a global financial crisis.
It is, in fact, a constitutional mandate that «the validity of the public debt of the United States authorized by law (…) must not be questioned, an argument that the White House uses to criticize Republican lawmakers who have established conditions to give green light to a roof raise.
Here’s the crux of the matter: Conservative lawmakers, including House Speaker Kevin McCarthy, have suggested they will ask for budget cuts to agree to lift the cap.
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Some US media view the matter as a demand from the most reactionary congressmen of the Republican Party, who hold great power in the chamber due to the narrowness of their party.
The truth is that it is not the first time that conservatives have tried to link the debt ceiling to the approval of spending limits.
In 2011, during the presidency of Barack Obama (2009-2017), the Lower House, then also controlled by the Republicans, refused to raise the limit until the Democrat agreed to approve a series of restrictions on public spending that have been in force. until very recently.
The standoff met with the greatest uncertainty in financial markets since the 2008 crisis, and resulted in a $1.3 billion increase in financing costs for 2011, according to the US Government Accountability Office (GAO). , in English).
The agreement then came two days before the United States faced the situation of being unable to meet its debts, something that led the risk agency Standard and Poor’s (S&P Global) to lower the country’s credit rating from «AAA» to «AA+».
The measure of debt limit It was established in 1917 in the United States to stop having to approve every request for Treasury spending during World War I, without losing sight of the size of the debt.
As highlighted by the Brookings Institution, no other country in the world, except Denmark, has a separate rule that limits debt, something that for that laboratory of ideas demonstrates the «uselessness» of the measure.
Many media warn that defaulting on the debt could lead the United States to suffer an immediate recession. As an example, Brookings explains that in 1979, due to an administrative error, the country suffered a partial default that raised financing costs by 40,000 million dollars in current currency.
