Debt Crisis
What is a debt crisis?
A debt crisis is when a government meets its national debt ceiling after having spent the total of the federal reserves and is unable to pay off the debt. A debt ceiling is a sort of budget set by Congress. The ceiling was most recently raised to $34.1 trillion back in 2021, but this ceiling was met a few months ago in January of 2023.
How does it happen?
There are various ways a country can enter a debt crisis. For example, when a government’s spending outweighs the revenue they receive through taxes, the discrepancy causes a debt crisis.
How can this affect US citizens and the youth?
The effects of the current debt crisis are unprecedented. Should the situation worsen, it could undo generations of progress made in our economy, setting the country back years. This would mean that the current youth would have to work harder by tenfold to rewind the unraveling ball that is the economy. Should the US delve into an economic crisis, it’d have devastating effects on the government spending programs such as medicare/medicaid for the older generations, financial aid for the younger ones, and the possibilities of increased taxes arise.
What is our government doing to solve this problem?
When the debt ceiling was met in January of this year, Congress had decided at the time to suspend the ceiling rather than raising it. This means that the government is temporarily allowed to “go over budget.̈ To avoid over-spending as much as possible, the government has urged “extraordinary measures' ' including suspending some of the spending of government workers' retirement and healthcare plans.
The X-date, the day in which the government officially can no longer pay its bills, approaches. There is no specific day that X-date is placed on, rather it’s more of an estimate. However, government officials and economists have predicted that X-date will be sometime in June to early August. But, this problem was brought to the US’s attention in January, so why has there not been a solution? This can most likely be explained through the opposition between Democrat President Biden and Republican Speaker of the House, Kevin McCarthy. In summary, President Biden hopes for a raise in the debt ceiling, while House Speaker McCaarthy hopes to impose spending cuts. Biden refuses to negotiate with McCarthy as McCarthy is attempting to pass legislation in a democrat majority Congress.
Sources:
https://apnews.com/article/us-debt-limit-political-friction-3652d50a1567c1e7ab544614b7f2b357
