United States Treasury Secretary Mnuchin has asked Congress to raise the country’s federal debt ceiling, which was suspended back in 2015. He thinks that if they do, and do so quickly, it will prevent a United States default that has been lingering over the country’s economy for quite some time now.
In his letter to the congressional leaders, he stated that state and local securities are going to be no longer used by the Treasury as of March 15th, reports CNBC. This is the date that the debt limit expires. He stated that the Treasury would start taking more extraordinary steps the following day, especially because the country will hit their statutory limit. So, he wants the Treasury to prevent default in any way that they can.
He went back to reciting what was said during his confirmation hearing, that he wants to improve the country’s debt and credit. Therefore, he wants Congress to increase the debt limit as the first step toward the United States meeting their obligations and promises.
The Debt Ceiling and Our First Opportunity
The letter was addressed to Paul Ryan, and discusses the sale of state and local securities, which will be suspended from the Treasury. The Treasury expects to stop payments to certain pension funds in order to prevent from falling behind on due payments.
Right now, the country’s government pays millions to Social Security, Medicare, and funding areas like military, government research, veteran care and more. Those funds come from the Treasury Department, which is a complicated system of cash.
Budget experts have now predicted that if the ceiling is not raised per the Treasury Secretary’s request by September at the latest, the branch will run out of ways to delay their default and the government would officially be behind on their debts.
That means that the Trump administration and Congress have several big decisions that they must address immediately.
Right now, they could vote to suspend or raise the debt ceiling and solve the issue, but that is difficult because lawmakers tend to favor debt as they do poison. Increasing the debt ceiling without increasing taxes would only make matters worse for the country.
Once the Treasury runs out of ways to pay their debts, Congress will be forced to increase the debt ceiling. Should they fail to do so, the country would default on their government obligations—for the first time ever. If the country were to default, it would affect global markets and most likely create another economic crisis within the United States.
Congress is notorious for delaying action until the very last minute, and most likely they will do the same with the default issues. Therefore, they will either decline or accept the increase, but most feel that they would increase rather than avoid the consequences of a default and economic crash.