What Happens Next in the Debt Limit Debate?
Ms. Yellen will most likely send additional letters to lawmakers with updates on how much more time she can buy with those extraordinary measures. She will also outline additional actions the Treasury can take to stay under the $31.4 trillion debt cap.
That could include suspending the daily reinvestment of securities held by the Treasury’s Exchange Stabilization Fund, a bucket of money that can buy and sell currencies and provide financing to foreign governments, or temporarily moving money between government agencies and departments to make payments as they come due.
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The Role of Congress
Congressional action on the debt limit has increasingly waited until after the Treasury Department is close to exhausting its extraordinary measures.
In 2021, the last time the federal government hit the debt ceiling, Senate Republicans and Democrats agreed to a short-term extension of the borrowing cap less than two weeks before a default. Two months later, as the Treasury warned that it could breach the statutory limit on its ability to borrow, Congress gave its final approval to a measure that would raise the debt ceiling by $2.5 trillion.
Such a deal faces tougher odds this time around.
Mr. McCarthy has called on the Biden administration and congressional Democrats to negotiate spending cuts in order to win Republican support in the House for raising the debt limit. “We’ve got to change the way we are spending money wastefully in this country,” he said this month, “and we’re going to make sure that happens.”
Mr. Biden, speaking at the White House on Friday, said there would be “honest debates” over how to confront the nation’s ballooning debt. He said he planned to raise it in his upcoming State of the Union address, in addition to meeting with Mr. McCarthy.
“I accept your invitation to sit down and discuss a responsible debt ceiling increase to address irresponsible government spending,” Mr. McCarthy said after, in a statement posted on Twitter. “I look forward to our meeting.”
Article source: https://www.nytimes.com/2023/01/20/business/economy/debt-limit-whats-next.html