US to max out on debt soon, setting up political fight

WASHINGTON (AP) — The federal government is on track to max out on its $31.4 trillion borrowing authority as soon as this month, starting the clock on an expected standoff between President Joe Biden and the new House Republican majority that will test both parties’ ability to navigate a divided Washington, with the fragile global economy at stake.

Once the government bumps up against the cap — it could happen any time in the next few weeks or longer — the Treasury Department will be unable to issue new debt without congressional action. The department plans to deploy what are known as “extraordinary measures” to keep the government operating. But once those measures run out, probably mid-summer, the government could be at risk of defaulting unless lawmakers and the president agree to lift the limit on the U.S. government’s ability to borrow.

The expected showdown over the debt limit would be a stark display of the new reality for Biden and his fellow Democrats, who enjoyed one-party control of Washington for the past two years. It would presage the challenges to come in achieving even the modest ambitions that Democrats are bringing to the task of legislating in a divided Capitol.

The White House has insisted that it won’t allow the nation’s credit to be held captive to the demands of newly empowered GOP lawmakers. But the concessions made by new House Speaker Kevin McCarthy in his arduous path to securing the job raise questions about whether he has the ability to cut any kind of deal to resolve a standoff.

McCarthy, who secured his post after 15 rounds of voting and major compromises with hard-line members of his caucus, has said that his fellow Republicans will only agree to increase the debt ceiling in return for spending cuts of unspecified magnitude. And a new rule that allows any lawmaker to trigger a vote for McCarthy’s removal could make even the most urgent of votes a dicey matter.

Treasury Secretary Janet Yellen speaks at the Treasury Department in Washington, Jan. 10, 2023. The federal government is on track to max out on its $31.4 trillion borrowing authority as soon as this month. That starts the clock on an expected standoff between President Joe Biden and the new House Republican majority. (AP Photo/Carolyn Kaster, File).

Treasury Secretary Janet Yellen speaks at the Treasury Department in Washington, Jan. 10, 2023. The federal government is on track to max out on its $31.4 trillion borrowing authority as soon as this month. That starts the clock on an expected standoff between President Joe Biden and the new House Republican majority. (AP Photo/Carolyn Kaster, File).

WASHINGTON (AP) — The federal government is on track to max out on its $31.4 trillion borrowing authority as soon as this month, starting the clock on an expected standoff between President Joe Biden and the new House Republican majority that will test both parties’ ability to navigate a divided Washington, with the fragile global economy at stake.

Once the government bumps up against the cap — it could happen any time in the next few weeks or longer — the Treasury Department will be unable to issue new debt without congressional action. The department plans to deploy what are known as “extraordinary measures” to keep the government operating. But once those measures run out, probably mid-summer, the government could be at risk of defaulting unless lawmakers and the president agree to lift the limit on the U.S. government’s ability to borrow.

The expected showdown over the debt limit would be a stark display of the new reality for Biden and his fellow Democrats, who enjoyed one-party control of Washington for the past two years. It would presage the challenges to come in achieving even the modest ambitions that Democrats are bringing to the task of legislating in a divided Capitol.

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The White House has insisted that it won’t allow the nation’s credit to be held captive to the demands of newly empowered GOP lawmakers. But the concessions made by new House Speaker Kevin McCarthy in his arduous path to securing the job raise questions about whether he has the ability to cut any kind of deal to resolve a standoff.

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Lots of sound and fury on US debt, but not a crisis — yet.

McCarthy, who secured his post after 15 rounds of voting and major compromises with hard-line members of his caucus, has said that his fellow Republicans will only agree to increase the debt ceiling in return for spending cuts of unspecified magnitude. And a new rule that allows any lawmaker to trigger a vote for McCarthy’s removal could make even the most urgent of votes a dicey matter.

McCarthy said he’s spoken with Biden about the coming debt ceiling and told the president “it doesn’t have to come to that” — meaning a federal government shutdown over spending levels.

“This is our moment to change the behavior,” McCarthy said Tuesday on Fox News Channel’s “Hannity.”