Nation closing in on $31.4T borrowing limit 

The federal government is closing in on the $31.4 trillion borrowing limit, meaning a high-stakes fight over raising the debt ceiling is fast approaching. 

An estimate from the Peter G. Peterson Foundation places the nation’s debt at $31.39 trillion and counting on Wednesday, just a hair below the limit set more than a year ago. 

That doesn’t mean the debt ceiling will have to be lifted this week — or even this month. The Treasury Department can generally use what are known as extraordinary measures to put off an actual debt crisis.

But it’s clear the fight is edging closer, putting the White House on a collision course with a new House majority demanding deep discretionary spending cuts in exchange for any increase to the debt ceiling.

“I think this is going to be the defining moment of the year,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB) said, adding it’s “certainly possible that we’ll hit that limit this month, or next month.”

The extraordinary measures used by Treasury generate cash to help the government pay its debts, which include halting pension fund contributions and prematurely redeeming Treasury bonds, could run out sometime in July, according to an estimate from the CRFB. 

That means Congress will need to act by mid-summer at the latest to prevent the government from defaulting on its debt.

Just getting close to the so-called X-date poses risks. After the 2011 debt ceiling fight between Republicans and then-President Obama, S&P downgraded the nation’s long-term credit rating. 

Speaker Kevin McCarthy (R-Calif.) promised that any debt ceiling increase would be paired with spending cuts to win over his GOP opponents in last week’s Speakership fight. But Democrats will likely refuse to go along with those cuts, setting up a stalemate. 

“If you’re going to ask for an increase in the limit, at some point in time, you’ve got to sit down and say why are we hitting the limit? Why are we maxing out the credit card?” House Majority Leader Steve Scalise (R-La.) told reporters Tuesday. 

Experts say that a default on the federal debt could upend the financial system and send the U.S. economy into a recession, in addition to pausing government benefits such as Social Security and Medicare. 

A 2021 report from Moody’s Analytics found that a default would cost the U.S. roughly 6 million jobs and $15 trillion in household wealth. Damage to the U.S. credit rating would likely cause interest rates for homes and cars to spike. 

There’s also concern about how it would impact the country’s standing on the global stage.

“We borrow a lot of money in world markets, and the U.S. Treasury bond is the single most valuable risk-free security there is,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution.

“So why would we want to put in doubt the possibility that we might not be able to pay our obligations?”

A recent report from The Associated Press indicated the government could hit the debt ceiling as soon as this week. The…

Read More: Nation closing in on $31.4T borrowing limit 

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