An increase in the debt ceiling is intended to prevent the US government from imminent default.
(Photo: dpa)
Washington The US Congress has prevented an imminent government default by raising the debt ceiling. The House of Representatives voted with a majority of Democrats on Wednesday night to allow the government to borrow $ 2.5 trillion in additional debt. The vote was 221 to 209 votes.
A few hours earlier, the narrow majority of the Democrats in the Senate had also voted in favor. US President Joe Biden has yet to put the law into effect with his signature, which in this case should only be a formality.
The Treasury Department last warned that the government could run out of money this week without raising the limit. A default by the world’s largest economy could have triggered a global financial crisis and economic downturn.
The government’s debt ceiling was last at $ 28.9 trillion, according to the Congressional Budget Office (CBO). The new debt would therefore result in an upper limit of $ 31.4 trillion – significantly more than the US economic output of a year. According to reports, the new credit line should be sufficient to finance government business until 2023. This would mean that the politically sensitive issue would not have to be voted on again before the congressional election in November next year.
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Trillions are an unimaginable order of magnitude. In the text of the law, the number is written out: It is about 2,500,000,000,000 US dollars. The amount would be almost the same as France’s economic output last year. For comparison: According to the World Bank, the gross domestic product (GDP) in the USA was around $ 21 trillion in 2020.
The political tussle over raising the debt ceiling has been dragging on for months. The US Congress agreed to raise the debt ceiling by $ 480 billion in October to allow more time for a longer-term solution. The Republicans refused to support US President Joe Biden’s Democrats. Ultimately, they agreed to a simplified procedure that allowed the Democrats to push through the Senate increase with a narrow majority on their own.
The upper limit has already been raised more than 80 times
The US government had recently had to finance ongoing business with “extraordinary measures”. Treasury Secretary Janet Yellen had warned that there was limited room for maneuver. From this Wednesday there could be a risk of default, she warned.
The dispute over the upper limit is usually bitter in Congress until the last minute. So far, however, there has never been a serious payment default. The upper limit has already been raised more than 80 times, mostly jointly by both parties.
Most countries do not have such a parliament-controlled debt ceiling. Most of the time, the amount of debt results from the resolutions passed by parliaments, for example through the budget and other laws, which result in expenditure. In the USA, too, there have recently been calls to abolish or suspend the border. However, the proposals have not yet found a majority in Congress.
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