On Thursday, January 19, 2023, Treasury Secretary Janet Yellen announced that the United States had hit its debt ceiling of $31.4 trillion and is now relying on “extraordinary measures” to continue paying its bills. These measures should carry the U.S. through early June, at which point the government risks default if lawmakers can’t reach a deal to raise the national debt limit.
Defaulting could have potentially disastrous consequences for the U.S. economy, such as higher interest rates, job losses, and a decline in GDP. It could also negatively impact those who rely on government benefits and services.
Indeed, this is not the first time the U.S. has reached its debt limit. Nor is it the first time Congress has used it as a bargaining chip.
In 2011, the U.S. got dangerously close to defaulting on its debt, leading Standard & Poor’s to downgrade the country’s AAA credit rating for the first time ever. As a result, markets plummeted, interest rates jumped, and the country’s borrowing costs increased by $1.3 billion.
Now, U.S. lawmakers are locked in a political stalemate as they debate raising the debt ceiling once again. Meanwhile, the economy hangs in the balance.
As we watch the drama unfold, here’s what you need to know about the U.S. debt ceiling.
