Today, Treasury Secretary Janet Yellen told Congress that inaction on raising the debt limit could lead to a self-inflicted economic recession and a financial crisis.
What is the debt ceiling?
The debt ceiling, also called the debt limit, is a cap on the total amount of money that the federal government is authorized to borrow via U.S. Treasury bills and savings bonds to fulfill its financial obligations. Because the U.S. runs budget deficits, it must borrow huge sums of money to pay its bills.
Why does the U.S. limit its borrowing? According to the Constitution, Congress must authorize borrowing. The debt limit was instituted in the early 20th century so the Treasury did not need to ask for permission each time it needed to issue bonds to pay bills.
When will the debt limit be breached?
After Senate leaders agreed to a short-term deal to raise the debt ceiling on Oct. 7, the Treasury estimated that the government can continue borrowing through December.
What would happen if the debt limit was hit?
Today, Treasury Secretary Janet Yellen told Congress that inaction on raising the debt limit could lead to a self-inflicted economic recession and a financial crisis.
Yellen said that failing to raise the debt ceiling could affect programs that help millions of Americans, including delays to Social Security payments.
She stated, “The first is the debt limit. I cannot overstate how critical it is that Congress address this issue. America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery. In a matter of days, the majority of Americans would suffer financial pain as critical payments, like Social Security checks and military paychecks, would not reach their bank accounts, and that would likely be followed by a deep recession.”
Council of Seniors will bring you more updates on this issue as we have them.