(USNewsBreak.com) – Congress set a debt ceiling deadline of December 3, which was recently extended to December 15 by Treasury Secretary Janet Yellen. To avoid defaulting, lawmakers must raise the debt limit or stop borrowing before that day arrives. Democrats and Republicans are not in agreement over the issue yet, but that doesn’t necessarily mean they will manage to find common ground. Troublingly, a well-known think tank now suggests a default is almost certain if the government fails to take action soon.
Running Out of Time
On November 18, the Bipartisan Policy Center (BPC) cited a 50% chance for the US government to become insolvent. The organization estimates that might happen as soon as mid-December or as late as early February.
The recently-passed Infrastructure Bill President Biden signed into law isn’t helping. The BPC says the spending plan sped up the timeline significantly, increasing the risk of default because of its expensive bottom line. Specifically, the Highway Trust Fund transfer requires the government to move $118 billion by December 15. That reduces available capital.
To avoid a complete catastrophe, the BPC says Congress must take action at some point before it goes on recess in December. It is too risky to delay the action into the new year.
The BPC issued its prediction shortly after Yellen’s statement on November 16. At the time, she felt the country would become unable to pay its bills no later than December 15.
Problems in Congress
Congress has been focusing on passing the Biden Administration’s two very large spending bills. The adjusted Infrastructure Bill passed after Biden signed it into law a short time ago with a lower-than-expected price tag of $1.2 trillion. The House of Representatives passed the Build Back Better bill on November 19. However, Moderate Democrats in the Senate balk at its high price tag and refuse to pass it in its current state. That will likely force more negotiations and additional rewrites.
The biggest hurdle Democrats face is their lack of a majority in either congressional houses. While they hold a very small lead in the House of Representatives, numbers sit at an almost 50/50 split in the Senate. They need Republican support if they wish to increase the debt ceiling without having to go through reconciliation.
Still, Republicans are not likely to go along with any plans to raise the debt limit. They have made it clear Democrats will have to find a way forward on their own. Many GOP members cite the two large spending bills as a reason for their refusal to provide help.
The Risks
If Congress fails to raise the debt limit or suspend spending somehow, the US will default on its debts, a first in the country’s history. Beyond that, the overdraft would almost certainly impact the many Americans who receive government benefits while negatively affecting the global economy. The country is already struggling to recover from a pandemic; that’s a crisis Americans just can’t afford.
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