Last Thursday, the United States surpassed its debt ceiling, set at $31.3 trillion. In order to raise it, the Biden Administration has to come to an agreement with the Republican Party, which holds the majority in the House of Representatives.
The Administration's latest action comes in the form of a letter to its political adversaries. This Tuesday, Janet L. Yellen, Secretary of the Treasury, informed House Speaker Kevin McCarthy that she suspended investments in the G Fund, which is part of the federal employees' retirement system. In addition, Yellen alluded to the statute governing the G Fund's investments, which authorizes it to undertake such suspensions in order to avoid incurring the first default in U.S. history.
The solution lies in the hands of the Biden Administration and McCarthy
In the same letter, Yellen asked Congress to raise the debt ceiling. In response to this claim, Senate Republican leader Mitch McConnell explained at a press conference that its approval must come from an agreement between the House of Representatives and the Biden Administration:
In this current situation, the debt ceiling fix – if there is one, or how it's to be dealt with – will have to come out of the House. It's entirely reasonable for the new speaker and his team to put spending reduction on the table. I wish him well in talking to the president. That’s where a solution lies.
This agreement will be reached as long as the Biden Administration cuts public spending, which has been requested by the Republican Party. So far, the White House rejected the Republicans' request. However, the president did agree to meet with McCarthy to try to resolve the debt ceiling issue, although the date of the meeting has not yet been determined.
The belligerent Democratic Party
Republicans are trying to reach a consensus to alleviate the debt ceiling situation. Based on McConnell's words, the Democratic Party seems to be aiming for conflict.
This Tuesday, House and Senate Democratic leaders Hakeem Jeffries and Chuck Schumer, along with Biden, Kamala Harris, and other congressmen from their party, met in the Oval Office to show they are united and blame Republicans. In a meeting with reporters, Schumer stated:
Democrats are saying that we can come together in a moderate way. [Republicans] are extremists. That’s the contrast: Unity versus chaos.
In addition, the Senate Majority Leader hinted at the inefficiency of his political opponents:
One of the things we want to do on the debt ceiling is say to Republicans, show us your plan. Do they want to cut Social Security? Do they want to cut Medicare? Do they want to cut veterans benefits? Do they want to cut police? Do they want to cut food for needy kids? What’s your plan? We don’t know if they can even put one together.
What is the debt ceiling?
The Treasury Department defines the debt ceiling as "the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations."
These obligations include "Social Security and Medicare benefits, military salaries, interest on the national debt or tax refunds" among other payments. In the last 63 years, Congress has raised, extended, or revised the debt ceiling 78 times.