The U.S. government in under obligation to makes millions of payments each year. This outflow that runs into trillions of dollars each year is towards Social Security checks, military funding, paying Medicare bills, various researches, veterans’ care, and many other initiatives.
Budget experts are of the opinion that if the debt ceiling is not raised latest by August or September, the Treasury Department from where this cash is disbursed will run out of steps to delay default and that will be catastrophic as the US government will fall behind from fulfilling its obligations.
Steven Mnuchin, the Treasury Secretary called on Paul D. Ryan (R-Wis.), the House Speaker to lift the debt ceiling “at its first opportunity.” As of now, the debt limit is $19.9 trillion and according to CBO (Congressional Budget Office), Congress must increase it before it gets too late for the Treasury to borrow sometime in the fall.
In a statement released, CBO states, “If the current suspension is not extended or a higher debt limit is not legislated before March 16, the Treasury will, from that date forward, have no room to borrow under standard operating procedures. Therefore, to avoid breaching the ceiling, the Treasury would begin taking the extraordinary measures that would allow it to continue to borrow for a limited time.”
Mnuchin wrote to Ryan that the government is now forced to suspend the sale of certain state and local securities. The treasury is also likely to suspend payments to certain pension funds to delay the outflow for as long as possible. But soon the government will run out of options and ultimately falter if the remedial actions are not taken anytime soon.
In his exact words, he said, “As I said in my confirmation hearing, honouring the full faith and credit of our outstanding debt is a critical commitment. I encourage Congress to raise the debt limit at the first opportunity so we can proceed with our joint priorities.”
There are difficult choices in front of the White House and Congress now. They have the option of going for a straight vote to either raise or suspend the ceiling, but that may prove difficult. This is because many lawmakers feel that without changing the tax practices it is like kicking your own feet. In case the policymakers decide on not raising the debt limit, then the Treasury will have no choice but to prioritise payments and will have to stop paying certain bills.