GOP and White House talks continue as debt ceiling deadline approaches (2023)

FAQs

Did President Biden pass the debt ceiling? ›

President Joe Biden signed into law Saturday a bill to suspend the nation's debt limit through January 1, 2025, to avert a first-ever US default.

High-stakes talks on the debt ceiling resumed Friday evening, after a six-hour pause triggered by House Republican negotiators walking out of the room in frustration. One of the toughest sticking points in the talks has been the question of spending caps, a key GOP demand but a red line for many Democrats.

The House passed a bill to suspend the debt ceiling on Wednesday, clearing a major legislative hurdle with just days left before the US is expected to default. The final House vote was 314 to 117, with 149 Republicans and 165 Democrats supporting the measure.

Two-year debt increase, spending limits

The agreement would keep nondefense spending roughly flat in the 2024 fiscal year and increase it by 1 percent the following year, as well as provide for a two-year debt-limit increase — past the next presidential election in 2024.

Domestic Holders of Federal Debt

The Federal Reserve, which purchases and sells Treasury securities as a means to influence federal interest rates and the nation's money supply, is the largest holder of such debt.

1837: Andrew Jackson

(In 1835, the $17.9 million budget surplus was greater than the total government expenses for that year.) By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off.

U.S. debt, long viewed as ultra-safe

Its debt, long viewed as an ultra-safe asset, is a foundation of global commerce, built on decades of trust in the United States. A default could shatter the $24 trillion market for Treasury debt, cause financial markets to freeze up and ignite an international crisis.

Fourteenth Amendment Equal Protection and Other Rights

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

The U.S. Senate passed a debt ceiling bill, addressing the issue just before the country would have defaulted on its debts. Senators voted 63-36 to pass the bill. Both senators Joe Manchin, a Democrat, and Shelley Moore Capito, a Republican, voted yes. The bill now goes to President Biden, who has said he will sign it.

Did the Senate vote for the debt limit? ›

The Senate vote was 63 to 36. Take a look at how every member of the Senate voted on its final passage.

White House aides privately estimate they may need to deliver as many as 100 Democratic votes to ensure an eventual debt limit deal can pass the narrowly divided House, two people familiar with the matter told POLITICO.

Whenever the Treasury Department could no longer pay the government's bills, Congress has acted quickly [PDF] and sometimes unanimously to increase the limit on what it could borrow. Since 1960, Congress has increased the ceiling seventy-eight times, most recently in 2021.

WASHINGTON — The debt ceiling agreement negotiated between House Republican leaders and the White House would cap the defense budget topline at President Joe Biden's $886 billion request for fiscal 2024, a 3.3% increase over this year. It would also cut non-defense spending to $704 billion.

To provide more flexibility to finance the United States' involvement in World War I, Congress modified the method by which it authorized debt in the Second Liberty Bond Act of 1917. Under this Act, Congress established an aggregate limit, or "ceiling," on the total amount of new bonds that could be issued.

As recently as 2020, total debt in the United States relative to GDP exceeded China's. But as of mid-2022, China's relative debt burden stood 40 percent higher than America's.

As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

According to usafacts.org, as of January 2023, Japan owned $1.1 trillion in US Treasuries, making it the largest foreign holder of the national debt. The second-largest holder is China, which owned $859 billion of US debt.

Except for about a year during 1835–1836, the United States has continuously had a fluctuating public debt since its Constitution went into effect on March 4, 1789.

How high can the US debt go? ›

The debt ceiling is the maximum amount of money the government can borrow. On January 19, the US hit its borrowing limit of $31.4 trillion. Since then, the Treasury has implemented a number of measures to avoid failing to pay back its legal obligations, known as a default.

The federal government borrows money from the public by issuing securities—bills, notes, and bonds—through the Treasury. Treasury securities are attractive to investors because they are: Backed by the full faith and credit of the United States government. Offered in a wide range of maturities.

China's demand for Treasurys helps keep U.S. interest rates low. It allows the U.S. Treasury to borrow more at low rates. Congress can then increase the federal spending that spurs U.S. economic growth.

Norway is the country with the highest level of household debt based on OECD data followed by Denmark and the Netherlands.

The odds of the U.S. government missing its debt ceiling deadline have reached about 25% — and the chances are rising by the day, according to a new estimate by JPMorgan Chase experts.

A default on U.S. debt could trigger a worldwide recession and upend stock markets in addition to wreaking havoc in Americans' financial lives. Anna Helhoski is a senior writer covering economic news and trends in consumer finance at NerdWallet. She is also an authority on student loans.

WHAT DOES BIDEN SAY? Biden has said his administration is studying the idea of invoking the 14th Amendment. He said he's skeptical that it is a viable option but the “one thing I'm ruling out is default.” “The problem is it would have to be litigated,” he said of the constitutional reasoning on Tuesday.

This is because, for the first time, the proposed Amendment added the word "male" into the US Constitution. Section 2, which dealt explicitly with voting rights, used the term "male." And women's rights advocates, especially those who were promoting woman suffrage or the granting of the vote to women, were outraged.

Do I get student loan forgiveness? ›

Who qualifies for student loan forgiveness? To be eligible for forgiveness, you must have federal student loans and earn less than $125,000 annually (or $250,000 per household). Borrowers who meet that criteria can get up to $10,000 in debt cancellation.

Some $886 billion will be spent on defense, according to the bill text. The debt ceiling bill that House Republicans passed in April would have returned discretionary spending to fiscal 2022 levels and then limited the growth in spending to 1% for a decade. Defense spending would have been protected.

art. I, § 8, cl. 1 ( The Congress shall have Power . . . to pay the Debts and provide for the common Defence and general Welfare of the United States . . . . ).

The war left Congress in debt. Congress had paid soldiers in full for military service in the war. Congress lacked the power to tax and couldn't pay its debts.] Robert Morris proposed a 10 percent tax on imported goods to help pay the national debt.

When the Senate considers the bill, they can vote on it indefinitely. When there is no more debate, the bill is voted on. If 51 of 100 Senators vote for it, the bill passes by a simple majority.

Under Senate debate rules, it takes a three-fifths majority of those duly chosen and sworn to invoke cloture and end debate on a piece of legislation.

Many people believe that much of the U.S. national debt is owed to foreign countries like China and Japan, but the truth is that most of it is owed to Social Security and pension funds right here in the U.S. This means that U.S. citizens own most of the national debt.

At the end of FY 2022 the federal debt was $30.84 trillion. At the end of FY 2023 federal debt is “guesstimated” to amount to $32.69 trillion. Thus far, on 2023-06-22, the federal debt is $32.17 trillion. See Coronavirus Update page.

Is the US national debt increasing or decreasing? ›

How has the national debt changed over time? The national debt has grown by $25.73 trillion since 1993. The largest single-term increases took place under President Donald Trump, largely in response to the COVID-19 pandemic, and President Barack Obama's first term during the Great Recession.

The United States led the ranking of countries with highest military spending in 2022, with 877 billion U.S. dollars dedicated to the military. That constituted nearly 40 percent of the total military spending worldwide that year, which amounted to 2.2 trillion U.S. dollars.

Defense spending accounts for 12 percent of all federal spending and nearly half of discretionary spending. Total discretionary spending — for both defense and nondefense purposes — is typically only about one-third of the annual federal budget.

U.S. military spending FY 2000-2022

In 2022, the United States spent around 876.94 billion U.S. dollars on its military. U.S. military spending has been increasing in current dollar terms since 2016. Spending increased dramatically in 2022 after the Russian invasion of Ukraine.

The Fed tries to influence the supply of money in the economy to promote noninflationary growth. Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money to pay off the debt would make inflation worse.

The U.S. debt is the total federal financial obligation owed to the public and intragovernmental departments. The U.S. national debt is so big because Congress continues both deficit spending and tax cuts.

Breaking Down the National Debt

Public debt is made up of both public debt and intragovernmental debt. The majority of the debt—about $24.5 trillion—is debt held by the public. This includes Treasury bills, notes, and bonds owned by U.S. investors, the Federal Reserve, and foreign governments.

The debt limit caps the total amount of allowable outstanding U.S. federal debt. The U.S. hit that limit—$31.4 trillion—on January 19, 2023, but the Department of the Treasury has been undertaking a set of “extraordinary measures” so that the debt limit does not yet bind.

Flashpoints that greatly contributed to the debt over the past 50 years include the wars in Iraq and Afghanistan, the 2008 financial crisis and the 2020 COVID-19 pandemic -- the latter two prompting sweeping stimulus measures from Congress that cost trillions of dollars.

The United States has the world's highest national debt at $31.4 trillion. Global debt currently stands at $305 trillion, $45 trillion higher than before the COVID-19 pandemic, according to the Institute of International Finance (IIF) – a global association of the financial industry.

What happens if U.S. debt gets too high? ›

What Happens If the Debt Gets Too High? Hitting the debt limit and failing to pay interest payments to bondholders would have grave economic consequences. The U.S. government would be in default, lowering its credit rating and increasing the cost of its debt. This would throw the U.S. economy into a tailspin.

If the U.S. paid off its debt there would be no more U.S. Treasury bonds in the world. "It was a huge issue ... for not just the U.S. economy, but the global economy," says Diane Lim Rogers, an economist in the Clinton administration. The U.S. borrows money by selling bonds.

Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations – an unprecedented event in American history.

U.S. debt to China comes in the form of U.S. Treasuries, largely due to their safety and stability. Although there are worries about China selling off U.S. debt, which would hamper economic growth, doing so in large amounts poses risks for China as well, making it unlikely to happen.

Learning about Countries and Their Debt

The best example can be taken from Hong Kong (it is a one of the debt free countries), whose economy has the least debt to GDP ratio. It is an almost debt free country. It has a well-regulated financial system and large foreign reserves.

Norway is the country with the highest level of household debt based on OECD data followed by Denmark and the Netherlands.

Any outstanding balance on your loan will be forgiven if you haven't repaid your loan in full after 20 years (if all loans were taken out for undergraduate study) or 25 years (if any loans were taken out for graduate or professional study).

Yes, but there are caveats. The president and other members of the executive branch, such as the secretary of education, can forgive debts only when Congress authorizes it.

If you qualify for student loan forgiveness or discharge in full, you will get a notification and will no longer need to make payments. In some cases, you may even get a refund. If only some of your debt is canceled or discharged, you'll still be responsible for repaying the rest of what you owe.