The debt limit debate probably sounds like a complicated economic issue.
That's because it is.
It also probably sounds like something you should be paying more attention to.
After all, a default could impact interest rates and put the credit of the United States at risk. It could also rattle the markets and your retirement fund, and also cause layoffs or even impact entitlement programs.
Despite all of this, it is probably a debate you have tuned out since it's been in the news for so long.
So should you begin to pay more attention?
What is happening right now?
In short, you probably shouldn't panic right now about a default.
That's because a possible default isn't going to happen this week or even next month.
However, it is something you may want to be paying more attention to in the coming weeks.
The debt limit is the absolute maximum amount the government is allowed to borrow to pay its debts. Right now, it's at $31.4 trillion dollars. The U.S. reached the debt limit back on January 19th.
However, since then, Treasury Secretary Janet Yellen has been deploying what's known as "extraordinary measures" to keep the economy from defaulting, like limiting investments in federal employee retirement plans.
Once the debt limit is raised again, plans are set to be made whole with no impact on retirees.
However, the secretary is starting to run out of maneuvers and time.
Previously, she said in early June her options could be exhausted. But there is a new concern that the date may be moving up.
That's because the IRS in April brought in fewer dollars than what was originally forecast.
Lower-than-expected tax receipts, so far, are partially the result of a weak stock market that produced a decline in capital gains taxes.
Political realities
As far as the political realities of raising the debt ceiling go, to some degree, little has changed between Democrats and Republicans over the last several months.
On Wednesday, Republican Speaker Kevin McCarthy passed the "Limit, Save, Grow Act" in the House, which raises the debt ceiling through March of next year, but does so by limiting spending and blocking student loan forgiveness.
However, Democratic leaders in the Senate have said that will not pass in their chamber.
President Joe Biden has said he wants a clean debt limit increase followed by budget negotiations. Speaker McCarthy doesn't want to raise the debt limit without some budget cuts.
"I am happy to meet with McCarthy on the debt limit but not on whether it gets extended," President Biden said on Wednesday.
"That's not negotiable," President Biden added.
Among all major democracies in the world, only Denmark and the United States have debt limit laws. Congress first instituted it back in 1917 and since the 1960s Congress has raised it or extended it around 80 times.
The United States has never defaulted.
House passes broad debt ceiling increase
The 217-215 vote moves a wide-ranging compromise bill to the Senate, where it is not expected to have the votes to pass.
