The United States is facing growing concerns about an economic crisis that could hit the first week of June 2023. Here’s everything you need to know about its impact on the economy. world economy.
What is the US debt ceiling?
The US debt ceiling is the maximum amount the US government is allowed to borrow to meet its financial obligations. The debt ceiling was established in 1917 so that Congress could control government spending. However, in recent years it has become a political issue.
The US Department of Treasury announced “The debt limit is the total amount the U.S. government is allowed to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military pay, interest on the national debt. taxes, refunds and other payments.”
The national debt of the United States is constantly growing because almost every year the government spends more than it collects from taxes, i.e. the deficit. So to pay this amount, the government borrows money.
According to financial data of the US Department of Treasury “The national debt is the amount the federal government has borrowed to cover the remaining costs incurred over time.
“In a given fiscal year (FY), when expenditures (e.g., road construction) exceed revenues (e.g., federal income tax dollars), a budget deficit occurs.
“To pay this deficit, the federal government borrows money by selling marketable securities such as government bonds, bills, notes, floating-rate notes, and Inflation Protected Securities. treasury (TIPS).”
How much is the US debt?
Since the establishment of the debt ceiling, the US government has borrowed significantly more and the debt ceiling is constantly changing.
According to the US Treasury Department, “Since 1960, Congress has enacted 78 times to permanently increase, temporarily extend, or amend the definition of the debt limit – 49 times under Republican presidents and 29 times under Party presidents. Democracy.”
The current US debt ceiling is $31.4 trillion. The US government reached its debt ceiling on January 19, 2023. If Congress does not raise the debt ceiling, the US government will not be able to pay its bills and will default on its debt.
Source: Financial data from the US Department of Treasury
According to an official letter from Treasury Secretary Janet Yellen, “I am writing to inform you that effective Thursday, January 19, 2023, the outstanding debt of the United States is expected to reach its legal limit.
“When the limit is reached, the Treasury Department will have to begin taking certain extraordinary measures to prevent the United States from meeting its obligations.”
Impact on the world economy
President Joe Biden has no plans to raise the debt limit and intends to take action to remedy the situation. In a recent conversation with speaker Kevin McCarthy, Joe said “But I think we both agree that we need to change course, that our debt is too great.
“And I think, in the end, we can find common ground, strengthen our economy, tackle this debt, but more importantly get this government to restart inflation, make us become less dependent on China and turn us into an allocation system that works when we’re done, right?”
A default would have a devastating effect on the US economy, causing interest rates to rise, stock prices to fall, and the dollar to fall.
According to written White House documents “Our government’s default could deprive our government of the historic economic gains that have been achieved since the president took office.”
Mark Zundi, chief economist at Moody’s Analytics, said, “No corner of the global economy will be spared,”
According to Moody’s analysis “With significant cuts to government spending in this scenario and the economy already fragile, the economy would be in recession by 2024, costing the economy 2.6 million jobs by then.” worst of the crisis and pushed the unemployment rate to a peak of almost 6%.”
Categories: Trends
Source: vcmp.edu.vn