U.S. hits debt ceiling as partisan standoff sparks economic worries

Subject : Economy

Section :External Sector

Concept :

The U.S. government hit its $31.4 trillion borrowing limit on Thursday, amid a standoff between the Republican-controlled House of Representatives and President Joe Biden’s Democrats on lifting the ceiling, which could lead to a fiscal crisis in a few months.
Treasury Secretary Janet Yellen informed congressional leaders including House Speaker Kevin McCarthy that her department had begun using extraordinary cash management measures that could stave off default until June 5.
The prospect for brinkmanship has raised concerns in Washington and on Wall Street about a bruising fight over the debt ceiling this year that could be at least as disruptive as the protracted battle of 2011, which prompted a downgrade of the U.S. credit rating and years of forced domestic and military spending cuts.

What is Debt ceiling? Who sets this figure?

Congress adopted a comprehensive debt ceiling, the statutory maximum of debt the government can issue, in 1939, intending to limit its growth.
United States will not be able to borrow any more money if it cross the debt ceiling and would, in theory, be forced to slash spending to make ends meet.
The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.
It does not prohibit Congress from creating further obligations upon the United States.
Possible, but desperate, remedies would include halting pay to the military, retirement health benefits, social security, and failing to pay government debts.
The US will not default on its own debt immediately.
The Treasury has various extraordinary measures in its armory, including halting the issuance of securities to state and local governments, which could buy about two months of leeway.