Treasury Secretary Janet Yellen warned Congress on Friday that the nation will hit the debt ceiling on Thursday, January 19. If lawmakers don’t suspend or raise the debt ceiling, Yellen wrote, there will be “irreparable harm” to the U.S. economy as well as global financial stability.
A breach of the debt ceiling could interrupt federal spending on things like Social Security, Medicare, or even just salaries of federal employees. It would also tank America’s credit rating.
Yellen said the Treasury will go to “extraordinary measures” to avoid default, giving lawmakers until early June to come up with a deal. These measures include redeeming existing and suspending new investments of the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund and suspending reinvestment in separate retirement savings funds for federal workers.
Now Republicans and Democrats have a limited time to negotiate on what happens next in order to prevent a global crisis. Unfortunately, the situation primarily offers no-win scenarios.
Kevin McCarthy promised to leverage the debt ceiling to cut spending in exchange for gaining the House speaker’s gavel. Meanwhile, the Biden administration has said there are no plans for such cuts, or negotiation at all on something that should be a bipartisan move to avoid crisis.
Worse, right-wing media is ratcheting up pressure on Republicans to leverage the debt ceiling for political demands, something that surely could push spineless Republicans to follow suit (even while it would harm their own base).
Democrats, tasked with advocating for good governance, are then stuck between holding the line and forcing Republicans’ hands to cooperate (risking potential national economic crisis if Republicans dig their heels in) and negotiating with them in order to avoid such disaster by potentially agreeing to cut essential social spending.
“What we’re creating is a showdown where Democrats are trying to show that the Republicans are being irresponsible, but the cost of proving that irresponsibility is an economic worldwide catastrophe,” Laura Blessing, senior fellow at Georgetown’s Government Affairs Institute, told The New Republic the last time this all happened.