The U.S. government is once again running up against its debt ceiling.
Congress will learn today (July 21) when the federal government will likely run out of money to pay its bills, setting the stage for the latest in a series of fights over what is known as the "debt ceiling."
A failure by Democrats and Republicans to work out differences over whether government spending cuts should accompany an increase in the statutory debt limit, currently set at $28.5 trillion U.S., could lead to a shutdown of the federal government -- something that has happened three times in the past decade.
On July 31, the U.S. Treasury Department technically bumps up against its statutory debt limit. Much like a personal credit card maximum, the debt ceiling is the amount of money the federal government is allowed to borrow to meet its obligations. These range from paying military salaries and IRS tax refunds to Social Security benefits and interest payments on the national debt.
Since the U.S. government spends more than it receives in revenues, it keeps operating by borrowing more and more money.
If Congress does not raise the debt ceiling from its current $28.5 trillion U.S. by then, Treasury Secretary Janet Yellen is expected to take special steps to avoid a government default. Such stop-gap measures are effective for only a short period.
The non-partisan Congressional Budget Office is scheduled to release its latest estimate of when the government would be unable to pay its bills -- the so-called "X Date."
Democrats are eyeing several possibilities for heading off debt payment problems, such as attaching a debt-ceiling increase to a bipartisan infrastructure bill being negotiated in the Senate or as part of a stop-gap funding bill in September to avoid government shutdowns beginning on October 1 with the start of the new fiscal year.
Failure could lead to a repeat of the government shutdowns seen in 2013, 2018 and one that lasted 35 days from late December 2018 to January 2019. Cooperation from Republicans in passing a debt limit increase is essential given the 50-50 party split in the Senate, where most legislation requires 60 votes to pass into law.
The latest battle over the debt ceiling comes on the heels of Congress approving $5.7 trillion U.S. in COVID-19-related relief measures since early 2020, and as Democrats push for over $4 trillion U.S. in infrastructure investments, amid an estimated $3 trillion U.S. budget deficit this year alone.
