What is a Debt Ceiling? Why is it Important?
Too many, the debt ceiling may be something that is not of importance, as they feel it is not affecting them in any way. However, the debt ceiling is more important than many people may think. Without one, there would be a possibility that the U.S. government would be spending way more than it should. Therefore, that would put the government in a huge bankruptcy, which then would lead to the death of an entire economy. As scary as that may sound, the U.S. government is doing everything in its power to increase the debt ceiling, however, there has not been much success. “The debt limit, or debt ceiling, is a restriction on how much the federal government can borrow to pay its bills and allocate funds for future investments,” according to USA Facts.
Therefore, this is important because if this debt ceiling can not be met, then there would be what is called a default. A default would be catastrophic for the U.S. and the American people. In only one week, there would be a devastating amount of damage done. “If the default lasts for about a week, then close to 1 million jobs would be lost, including in the financial sector, which would be hard hit by the stock market declines,” according to CNN News. Therefore, the U.S. government is trying to avoid a default, by any means necessary.
What Has President Joe Biden Done For The Debt Ceiling?
President Biden had a trip planned, but unfortunately, it was cut short due to the debt ceiling issue. President Biden had to return immediately, as a default seems imminent for the U.S. “But with a deal still out of reach and the threat of the country’s first-ever default approaching, Biden will return early to Washington to continue negotiations,” according to NBC News. There is a hope that with President Biden’s return to the White House, negotiations will be made and a default will be averted. The U.S. has had several close calls in the past when it comes to defaults, however, has always avoided them. However, in this case, it seems rather unlikely, as this default could happen as soon as the beginning of June.
What Will Occur If a Settlement Is Reached?
There are certainly a lot of worries when it comes to the stock market, and how the economy will look if the U.S. is able to avert a default. Although it would be great if a default can be avoided, there may be certain negative implications after a negotiation is made. “One worry is that once a resolution is reached, the government could start to issue new debt, which might push Treasury yields higher, and in turn weigh on stocks,” according to MarketWatch.
There are many people that are reliant on the stock market. If new debts are made and pushed forward, stocks would certainly benefit negatively. However, the U.S. is fully trying to avoid the first default in history.
The Future of the Debt Ceiling and Default
A lot of citizens of the U.S. do not realize how devastating a default could be. It would be an incredibly large recession, and there would be millions of people that lose their jobs. Therefore, there needs to be action taken, and quickly, to help avoid default and meet the debt ceiling. The last thing that the American people, or even the U.S. needs is a default. That would surely deteriorate America’s economy, possibly to complete and utter bankruptcy. Therefore, it is imperative that a negotiation is made.
Written by David Loran Jr
Sources:
NBC News: Biden to cut Asia trip short to return and negotiate debt ceiling
MarketWatch: Debt ceiling debate: How U.S. government debt and stocks will perform if a resolution is reached, says DataTrek
USAFacts: What is the debt ceiling and why does it matter?
CNN News: 5 ways a debt default could affect you
Featured and Top Image Courtesy of Matt Johnson’s Flickr Page – Creative Commons License
Inset Image Courtesy of Jeff Myers’ Flickr Page – Creative Commons License
