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Debt Limit Approaching for U.S. Government

The U.S. government is approaching its $31.4 trillion borrowing limit amidst a standoff between the Republican-controlled House of Representatives and President Joe Biden's Democrats that could soon lead to a fiscal crisis.

US Capitol and flag of US
US Capitol and flag of US

Republican's Plan for Spending Cuts

Republicans aim to use the congressionally mandated federal debt ceiling to extract spending cuts from Biden and the Democratic-led Senate. White House Press Secretary Karine Jean-Pierre said, "It should be done without conditions. We should not be negotiating around it. It is the basic duty of Congress to get that done."

Debt Prioritization

Republicans have proposed a "debt prioritization" plan that would avoid default by urging the Treasury to prioritize debt payments and possibly other priorities, such as Social Security and Medicare, in case the limit is breached during negotiations. Republicans aim to complete the legislation by the end of March.

Risk of Brinkmanship

The possibility of brinkmanship has raised concerns in Washington and on Wall Street about a potential disruptive battle over the debt ceiling this year, similar to the prolonged battle of 2011, which prompted a downgrade of the U.S. credit rating and years of forced domestic and military spending cuts.

Negotiations to Begin Next Week

Negotiations on debt prioritization and spending are set to begin when lawmakers return to Washington next week. The Republican plan calls for balancing the federal budget in 10 years by capping discretionary spending at 2022 levels and using House oversight to identify federal programs that can be eliminated or scaled back in spending bills expected to emerge from the House Appropriations Committee later this year.