The US House of Representatives late Wednesday passed a bill to raise the public debt ceiling in the United States, after the White House exceeded the current ceiling of $ 31.4 trillion.
In January, the U.S. Treasury announced it had reached a $31.4 trillion debt ceiling, while the White House began talks with the House of Representatives to raise it.
Republican House Speaker Kevin McCarthy told Bloomberg that the passage should be matched by sharp cuts in federal budget expenditures in the coming years.
The bill would raise the debt ceiling by $1.5 trillion, lower than the White House's estimate of $4 trillion, the agency said.
The bill goes to the Senate (Upper House) for consideration and approval or rejection.
The U.S. Treasury Department may find itself unable to pay its bills within weeks if Congress fails to act.
McCarthy called on President Biden to begin negotiations on increasing the debt limit and cutting spending, and urged the Senate to either approve the House bill or pass a bill of its own.
What is the debt ceiling?
A debt ceiling is a restriction imposed by Congress (House and Senate) on the amount of money the federal government can borrow to pay its bills.
According to Anatolia's monitoring of US budgets for the past years, the federal government spends more than it earns in terms of financial revenues, which pushes it to borrow.
According to U.S. Treasury data, the debt ceiling has been raised 1960 times since 78.
Raising the debt ceiling allows the federal government to continue issuing Treasury bonds that generate revenue and help it pay its bills.
Investors around the world buy bonds because they are seen as a safe and reliable investment. In return, the government has funds for its many projects, from the military to social programs.
Refusal to raise the debt ceiling
In the event that the Senate refuses to raise the debt ceiling:
- The White House may find itself unable to fulfill its obligations to all federal institutions.
- The US may default on outstanding loan or bond payments, which means entering a severe default crisis that could affect the dollar's position as a payment or reserve currency.
In February, Treasury Secretary Janet Yellen warned that failure to resolve the debt ceiling hike would undermine the dollar, which plays the role of the reserve currency of most of the world.
Yellen said a potential U.S. default could trigger a global financial crisis and undermine the dollar's role as reserve currency.