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Hitting the national debt ceiling is a major worry for Washington right now. 

On Friday, Treasury Secretary Janet Yellen warned that the U.S. is on track to reach the debt limit, or the cap on how much money the federal government can borrow, 

 in December 2021 to a total of $31.4 trillion.

In the past, Congress has avoided breaching the limit by simply raising it. But House Republicans said they will not support increasing the debt ceiling this time around — 

not unless they get spending cuts or other concessions

In a letter to congressional leaders, Yellen said deadlock around the debt ceiling can cause "irreparable harm" to the economy and even global financial stability. She harkened back to 2011, when the U.S. 

If the U.S. reaches its debt ceiling, the Treasury will have to take "extraordinary measures" 

If there's a stalemate, a few things can happen.

First, the Treasury will begin to move money around to cover the shortfall in cash flow. These actions can only last for a few weeks or months. Once those 

run out, the federal government will have a hard time paying its obligations, like Social Security and Medicare.

So far, the U.S. has never defaulted on its debt. But Yellen warns that if Congress fails to act, that may happen as soon as June.

The debt ceiling has been raised often, but this time may be different

Although Congress has a pattern of raising the limit, the decision to increase the federal debt ceiling is never easy. 

House Speaker Kevin McCarthy told President Biden that Republicans are interested in imposing a spending cap in exchange for temporarily raising the debt ceiling. McCarthy pointed to a 

 between his predecessor and former President Donald Trump as a model. That agreement included bolstering spending for defense and domestic programs. 

But White House press secretary Karine Jean-Pierre said Biden is not interested in negotiating. 

"It's not and should not be a political football. This is not political gamesmanship. This should be done without conditions," she said in a 

When the U.S. hit its debt ceiling in 2011, it took months for the economy to recover

The last time the U.S. hit its debt ceiling was in 2011 and it rattled the markets, sunk stock prices, and took a toll on people's retirement savings. It was also the first time that the federal government 

Although the country avoided defaulting, the Treasury 

that delays in raising the limit bruised the economy, which took months to recover. 

So far, the markets are assuming this debt ceiling crisis will work out. But the 2011 debt ceiling breach shows that even brinkmanship can hurt investors, consumers and businesses.


Politics and Government News

Juliana Kim

Author

Scott Horsley

The U.S. is expected to hit its debt ceiling Thursday, forcing the Treasury to take "extraordinary measures" to pay off its bills. A political stalemate could lead to an unprecedented federal default.

The U.S. could hit its debt ceiling within days. Here's what you need to know.

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