The term ‘debt ceiling’ is used to describe the maximum amount that can be borrowed by the United Sates relying on bond financing. The history of the term dates back to 1917. When does the debt ceiling need to be raised? If governmental national debt levels reach certain limit the government will have to find other ways for its obligations payment until the limit is raised again. As the debt ceiling raises U.S. go deeper into the debt hole. Till 1953 there were no troubles with debt ceiling, but 70 years ago it has become a real problem. Especially it concerns the last 25 years. The statistics on debt ceiling within 5 years*
|End of fiscal year
|Debt (in billions, approximate figures)
|Major events in presidential term
|Trump tax cuts
|COVID-19 and 2020 recession
|$ 29, 617
|COVID-19 and American Rescue Plan Act
|Inflation Reduction Act and student loan forgiveness
And today as Yellen said, the USA like never before is close to default on its debts. According to the prognoses we can face it in June. And it will be unprecedented case that we’ve never faced with before (on condition that Congress doesn’t take any actions).contents ↑
When is the next debt ceiling deadline?
These days it is a top question for many Americans. What to anticipate? According to the prognosis the debt ceiling deadline will be reached in the end of 2023. But the exact timing is not announced. There are still debates on it. According to some points of view it can be in the middle of 2023 or in the second half of it (closer to the end). There is one more crucial thing to be taken into account while making the prognosis – the economy of USA. If this year we face a recession debt ceiling deadline is to be anticipated earlier. To sum it up, the next debt ceiling deadline depends on the following criteria:
- USA economy
- Actions of Congress
- Major events in presidential term.
The combination of these three criteria has a great impact on the fate of debt ceiling deadline. Historically, after reaching the limits the government can normally function for a couple of weeks. In 2021 they’ve managed to survive within11weeks.
The next discussion of the problem is scheduled on January, 31 – Frbruary, 1. There’s still a hope that debt ceiling extraordinary measures will help to keep the situation under control. Failing to resist the challenge there can be serious consequences. They affect USA economy, living standards of Americans and global stability in general. According to such bad scenario we must be ready for economic recession and heightened financial-market turbulence.
Measures to be implemented to keep operating in spite of reaching debt ceiling
There exist several debt ceiling extraordinary measures to continue operating. But they are useful only for a short period of time. Their purpose is to gain time. Such measures include delaying investments or selling asserts early, selling large amounts of gold, referring to the Fourteen Amendment which allows overriding the statutory debt limit and so on. In reality as soon as all the possible measures will have been taken there stays only one thing – to change the law to raise or suspend the debt ceiling.
What if we face debt ceiling crisis: the worst prognoses
Depression – that’s what can wait our nation if Congress will be unable to raise the debt ceiling 2023. The crisis concerns:
- Disruption of pension accounts;
- Cuts in crucial government programs;
- Delays/ stop paying different benefits: Social Security, veterans, Medicare and so on;
Of course, the most vulnerable element is young Americans. You ask why? Debt ceiling crisis affect them in many ways.
A difficult job market awaits our young generation because of the financial challenge. Employers wouldn’t be able to hire new employees lacking enough money for new ‘faces’ and fresh projects. Young Americans will have to compete for working position. For then it will be a real challenge.
- Student loans
If the debt ceiling won’t be raised there are chances that students won’t be financed until its raise. Or there’s another scenario for student loans – young generation will have to pay higher payments and interest rates change to bigger figures as well.
- Buying a house can become a challenge
First of all, the point is related to the previous one connected with jobs and taking loans. No job – no money. There’s one purpose – just to get through. That’s why young generation won’t be in a hurry to buy a house.
- The government will have to cut money for educational and health programs
All in all it affects the quality of life of young generation and make them face nothing but recession.
As we can see the negative consequences affect every level of society. It’s time for Congress to act now to face better future tomorrow. A situation like that we have already faced with in 2011. America was close to announce its default on debts. Debt ceiling crisis could cause dollar dawning, Treasury bond yields would skyrocket. World’s largest government market loses face.