Janet L. Yellen, the Secretary of the Treasury, wrote the congressional leadership on January 13, 2023, discussing the debt ceiling. She has been pressuring Congress to approve a bill to increase the nation’s $31.4 trillion debt ceiling as this will allow the United States to borrow more money to meet its spending obligations (Ewall-Wice). The U.S. Department of the Treasury is suspending investments in government retirement funds and anticipating that this will buy time until early June 2023 ( Warmbrodt). Prior to that, this critical issue needs to be rectified because if it isn’t, many other issues will arise. This could have all been prevented if the current administration had followed a better budget and spent taxpayer dollars more wisely, as some initiatives cost billions of dollars yet did not benefit America in any way, shape, or form. This will only worsen the American economy and U.S. dollar if it does not get resolved within the first two quarters of the year.
The United States would be unable to pay its debts and might go into default if the total amount of government debt reaches the threshold before raising the ceiling. There are many other issues that come along with this such as a recession, significant job losses, higher interest rates, and a stock market crash (Boak). If the market crashes, then companies won’t have enough money to pay their employees or innovate which is when their finance departments will look for several ways to cut costs. Corporations will want to avoid running into difficulties disbursing dividends to their remaining shareholders, which means they will need to make a lot of adjustments, such as laying off workers, to maintain the satisfaction of their investors and continue to operate efficiently.
One of the biggest expenses has been the current war going on between Russia and Ukraine as the U.S. has sent nearly $50 billion to Ukraine (Toft). This has been a very controversial topic as most Democrats are in support of America assisting Ukraine while most Republicans are aware of how bad this will be for the U.S. economy as it is increasing the debt. The revenue America makes is no where near the debt it is currently in which makes it even harder for America to pay its bills. A government shutdown may come of this if Congress does not come to an agreement soon. The United States government must prioritize its citizens and nation to avoid a recession that will be hard to come back from.
As long as Congress listens to Janet Yellen, this issue won’t be as significant as it is right now, and America will be able to avoid a steep market crash and a period comparable to the Great Depression. Ensuring the U.S. economy is stable is the best thing that they can do for the American people. The financial health of America is suffering, and if the debt problem is not resolved, everything that has transpired since 2020 will get worse. Interest rates were rising, inflation was reaching all-time highs, and with grocery costs still being greater than usual, the last thing anyone needs is more financial burdens.
Boak, Josh. “How ominous is the debt limit problem?” AP News, 2023. https://apnews.com/article/biden-us-department-of-the-treasury-united-states-government-janet-yellen-business-6fe9b54dcdfea58bead0f4c5f9f89a64
Ewall-Wice, Sarah. “The U.S. has hit the debt limit. Now what?” CBS News, 2023. https://www.cbsnews.com/news/the-u-s-has-hit-the-debt-limit-now-what/
Toft, Monica. “US military spending in Ukraine reached nearly $50 billion in 2022 – but no amount of money alone is enough to end the war.” The Conversation, 2023. https://theconversation.com/us-military-spending-in-ukraine-reached-nearly-50-billion-in-2022-but-no-amount-of-money-alone-is-enough-to-end-the-war-197492
Warmbrodt, Zachary. “Yellen says U.S. has hit debt limit, triggering extraordinary measures.” Politico, 2023. https://www.politico.com/news/2023/01/19/treasury-activates-extraordinary-measures-to-avoid-default-00078527