As the federal government approaches the $31.385 trillion debt limit, a potential showdown between Congress and the White House looms. The debt has grown dramatically in recent years due to high discretionary and mandatory spending, as well as bipartisan contributions over the past two decades. If Congress does not act, the Treasury Department will be forced to use extraordinary measures to pay the government's obligations and avoid default, giving lawmakers an additional three to five months to address the debt limit.
This could be the most contentious debt limit showdown since 2011, when GOP holdouts delayed hikes in exchange for the enactment of budget caps. The budget caps were lifted in 2019, but lawmakers declined to extend or reform them due to the COVID-19 pandemic.
The consequences of failing to raise the debt limit are potentially disastrous, with global economic and financial market implications and potential downgrades of the U.S. credit rating. It is imperative that lawmakers find a solution to this challenge. It remains to be seen how they will navigate this situation, but the stakes are high.