--- title: What Happens If a Debt Ceiling Agreement Isn't Reached description: A politically-divided Congress is at a crossroads over raising the U.S. government’s debt ceiling, as the country is at the brink of defaulting on their loans if an agreement isn’t made soon. canonical: https://time.com/6279707/debt-ceiling-agreement/ author: Solcyré Burga article:opinion: false article:content_tier: free article:published_time: 2023-05-14T19:34:49.000Z article:modified_time: 2023-12-11T20:12:43.000Z article:section: Politics og:title: What Happens If a Debt Ceiling Agreement Isn't Reached og:description: President Biden and top congressional lawmakers will meet early this week to discuss the default og:url: https://time.com/6279707/debt-ceiling-agreement/ og:site_name: TIME og:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt2cf6aa6f087e494c/698a3ce786f68e120b6f26e6/Biden.jpg?branch=production&width=1024&quality=75&auto=webp&crop=16:9 og:image:width: 1024 og:image:height: 576 og:image:alt: President Biden Delivers Remarks On The Debt Ceiling og:type: article twitter:card: summary_large_image twitter:title: What Happens If a Debt Ceiling Agreement Isn't Reached twitter:description: President Biden and top congressional lawmakers will meet early this week to discuss the default twitter:image: https://static.time.com/v3/assets/bltea6093859af6183b/blt2cf6aa6f087e494c/698a3ce786f68e120b6f26e6/Biden.jpg?branch=production&width=1024&quality=75&auto=webp&crop=16:9 ---  # What Happens If a Debt Ceiling Agreement Isn't Reached > Sponsored content. 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The Biden Administration remains locked in a standoff with congressional Republicans over raising the federal debt ceiling, just two weeks before the nation is set to default on its obligations for the first time. The U.S. government hit its congressionally imposed $31.4 trillion borrowing limit in January, and Treasury Secretary Janet Yellen has warned that the country could run out of cash as early as June 1 if Democratic President Joe Biden and Republican House Speaker Kevin McCarthy are unable to reach a deal to raise the debt ceiling._  by [Solcyré Burga](https://time.com/author/solcyre-burga/)  ## Solcyré Burga Reporter Updated: Dec 11, 2023 8:12 PM UTCPublished: May 14, 2023 7:34 PM UTC The Biden Administration remains locked in a standoff with congressional Republicans over raising the federal debt ceiling, just two weeks before the nation is set to default on its obligations for the first time. The U.S. government hit its congressionally imposed $31.4 trillion borrowing limit in January, and Treasury Secretary Janet Yellen has warned that the country could run out of cash as early as June 1 if Democratic President Joe Biden and Republican House Speaker Kevin McCarthy are unable to reach a deal to raise the debt ceiling.  by [Solcyré Burga](https://time.com/author/solcyre-burga/)  ## Solcyré Burga Reporter Updated: Dec 11, 2023 8:12 PM UTCPublished: May 14, 2023 7:34 PM UTC A politically-divided Congress is at a crossroads [over raising the U.S. government’s debt ](https://time.com/6278448/debt-ceiling-meeting-progress/?utm%5Fmedium=email&utm%5Fsource=sfmc&utm%5Fcampaign=newsletter+brief+default+ac&utm%5Fcontent=+++20230510+++body&et%5Frid=206920769&lctg=206920769)ceiling, as the country is on the brink of defaulting on their loans if an agreement isn’t made soon. The federal debt ceiling was last increased in December 2021, by $2.5 trillion to $31.4 trillion, which the government maxed out in mid-January. The Treasury Department said it has since taken “extraordinary measures” to avoid falling into default on their debt, though Treasury Secretary Janet Yellen warned that the government could run out of money for its bills as early as June 1\. “Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” Yellen[ wrote in a letter](https://home.treasury.gov/system/files/136/Debt%5FLimit%5FLetter%5FCongress%5FMembers%5F05012023.pdf) to House Speaker Kevin McCarthy on May 1. Lawmakers have made changes to the debt limit more than 100 times since World War II. This year Republicans have vowed to increase the debt ceiling so long as it’s suggested spending cuts are enacted. President Joe Biden, however, wants to see an increase in the debt ceiling separate from any budgetary changes. Defaulting would “produce an economic and financial catastrophe,” Yellen said [in a statement](https://home.treasury.gov/news/press-releases/jy1437), remarking that the government would not be able to make Social Security payments or invest in future projects. “Congress must vote to raise or suspend the debt limit. It should do so without conditions. And it should not wait until the last minute.” ## What are Republicans negotiating for? On Wednesday, House Republicans passed a spending bill that would increase the debt ceiling but cap federal spending for a decade. The bill, which narrowly passed the House, would [also roll back](https://time.com/6274409/debt-ceiling-vote-kevin-mccarthy-republicans/) the Biden administration’s energy tax credit, as well as impose certain work requirements on federal social programs, among other measures. The bill is not likely to move forward in the Democrat-controlled Senate, where many legislators are unhappy with the suggested concessions. President Biden also said he would veto the bill if it reached his desk. Republicans, however, see it as a step towards negotiations. “We lifted the debt limit; we’ve sent it to the Senate; we’ve done our job,” said House Speaker McCarthy after the bill passed. ## What happens if Congress doesn’t reach an agreement? If no Congressional action is taken and the government reaches its debt ceiling, it will have to default on its financial obligations, although this has yet to happen in history.. This has The government won’t be able to pay salaries for federal employees, veterans’ benefits, and also won’t be able to fund Social Security, affecting some 66 million Americans, though the future of social security is already under question as projections foresee that the fund’s reserves will run out by 2033\. Social Security recipients could temporarily see their checks arrive with a delay, depending on how long it takes politicians to negotiate the debt ceiling. A default would also seriously impact the global economy, [which relies on](https://www.crfb.org/papers/qa-everything-you-should-know-about-debt-ceiling#should) the relative stability of the United States. The Committee for a Responsible Federal Budget [projects](https://www.crfb.org/papers/qa-everything-you-should-know-about-debt-ceiling#should) that interest rates would increase and investment into Treasury securities would stop, impacting people’s car loans, credit cards, and more. Previous debt ceiling negotiations were also stalled under the Obama administration, marking a new standard of polarized political battles when it came to discussing the government’s spending budget. In 2011, House Republicans fought for months to decrease the deficit in exchange for a debt ceiling raise, impacting the country’s credit ranking for the first time ever. Discussions culminated two days before the Treasury said the United States would have exhausted all funds. That delay in voting to raise the debt ceiling affected the stock market and [led to higher borrowing rates](https://www.gao.gov/assets/gao-12-701.pdf) for the U.S. that cost the country an additional $1.3 billion in 2011, according to the United States Government Accountability Office. President Biden and top congressional lawmakers are set to meet early next week after talks were canceled Friday. “We’ve not reached the crunch point yet but there’s real discussion about some changes we all could make,” Biden [said on Saturday](https://time.com/6279664/biden-debt-ceiling-comments/) before boarding Air Force One. “But we’re not there yet.” _Correction_, May 15 The original version of this story misstated how much the debt ceiling last increased. It increased by $2.5 trillion, not from $2.5 trillion. ## Transcript [00:00] Condiments are warning that the US is on the precipice [00:02] of economic Calamity. [00:03] If the government can't come together and raise the federal [00:06] debt limit, now, this isn't the first time, [00:08] the US has been in this situation. [00:09] We've been here before and the debt-limit crisis has always [00:13] been resolved by Congress, but this year's B is turning out to [00:16] be a lot more messy than previous years. [00:18] And since this debt ceiling is one of the few must pass pieces [00:21] of legislation. Both parties have to use this issue as an opportunity [00:25] to take a political stand and exact concessions to cut back [00:29] on government spending, it would cause the government to [00:31] default on its legal obligations for the first time in history, [00:35] creating a financial crisis and threatening jobs for everyday [00:39] Americans. It could even potentially put the US get risk of a recession. [00:47] The only country that has a debt ceiling is Denmark the debt [00:51] limit or the debt. [00:51] Ceiling is a cap on the total amount of money that the federal [00:55] government is authorized to borrow to fulfill its Financial Obligations. [00:58] Everything at the government spends, money on military [01:02] to Social Security, and Veterans Benefits has to be funded, [01:06] either through tax revenue, or debt. [01:08] And for the last two decades, the US has been running a budget [01:11] deficit. Adding 25 trillion dollars in debt. [01:14] So the treasury Department now says that the government [01:17] could be unable to issue new debt and pay its bills as early [01:20] as June 1st. [01:21] But Congress has always acted when called upon to raise. [01:24] The debt limit has 1960 Congress. [01:27] Acted 78 separate times to permanently raise temporarily [01:30] extend a revised the debt limit. [01:32] The debt ceiling has become an increasingly political issue [01:36] in recent years, especially when power in Washington is divided [01:39] as it is right now, Republicans control the house and Democrats [01:43] control the presidency in the Senate. [01:44] Democrats have been very United on this front. [01:47] I have insisted from the beginning that they won't accept [01:50] any concessions attached to a deal and continue to blame Republicans [01:54] for taking the country's credit hostage in our stash. [02:01] Continue to me as we speak is not a fact and they're making [02:03] progress I made clear time and again to falling on a national [02:07] debt is not an option but that no negotiation strategy, [02:11] may be impractical with the June 1st deadline approaching [02:14] in less than two weeks. [02:14] The number of places that we are still far apart. [02:17] I mean, it didn't seem like the economy, [02:21] plays a pivotal role in how Americans cast their ballots. [02:24] So, the outcome of these debt limit discussions, [02:27] could shape. What happens in 2024, particularly if Biden was [02:31] unable to raise the debt limit before defaulting, [02:33] or if he accepts concessions that undo, [02:35] his legislative accomplishment, for instance, progresses. [02:38] My see him as weak. [02:39] If he accepts, the GOP is proposed, [02:41] work requirements for federal aid. [02:43] This is a very big moment for Joe Biden. [02:45] And as my colleague, Phil Elliott, remarkably little of it is [02:49] under his sole control. ```json [{"@context":"https://schema.org","@type":"NewsArticle","@id":"https://time.com/6279707/debt-ceiling-agreement/","mainEntityOfPage":{"@type":"WebPage","@id":"https://time.com/6279707/debt-ceiling-agreement/"},"headline":"What Happens If a Debt Ceiling Agreement Isn't Reached","datePublished":"2023-05-14T19:34:49.000Z","dateModified":"2023-12-11T20:12:43.000Z","description":"President Biden and top congressional lawmakers will meet early this week to discuss the default","url":"https://time.com/6279707/debt-ceiling-agreement/","keywords":["Congress","General Assignment"],"thumbnailUrl":"https://static.time.com/v3/assets/bltea6093859af6183b/blt2cf6aa6f087e494c/698a3ce786f68e120b6f26e6/Biden.jpg?branch=production&width=1200&quality=75&auto=webp&crop=1200:675&height=675","author":[{"@type":"Person","name":"Solcyré Burga","jobTitle":"Reporter","url":"https://time.com/author/solcyre-burga/"}],"articleSection":"Politics","image":[{"@type":"ImageObject","url":"https://static.time.com/v3/assets/bltea6093859af6183b/blt2cf6aa6f087e494c/698a3ce786f68e120b6f26e6/Biden.jpg?branch=production&width=1200&quality=75&auto=webp&crop=1200:675&height=675","width":1200,"height":675,"headline":"President Biden Delivers Remarks On The Debt Ceiling","caption":"President Biden Delivers Remarks On The Debt Ceiling","creditText":"Victor Blue—Bloomberg/ Getty Images","representativeOfPage":true}],"publisher":{"@type":"Organization","name":"Time","url":"https://time.com/","logo":{"@type":"ImageObject","url":"https://time.com/images/logo.png","width":528,"height":156},"foundingDate":"March 3, 1923","sameAs":["https://www.facebook.com/time","https://www.instagram.com/time/?hl=en","https://twitter.com/time","https://www.pinterest.com/timemagazine"]}},{"@context":"https://schema.org","@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"item":{"@id":"https://time.com/section/politics/","name":"Politics"}},{"@type":"ListItem","position":2,"item":{"@id":"https://time.com/tag/congress/","name":"Congress"}},{"@type":"ListItem","position":3,"item":{"@id":"https://time.com/6279707/debt-ceiling-agreement/","name":"What Happens If a Debt Ceiling Agreement Isn't Reached"}}]},{"@context":"https://schema.org","@type":"VideoObject","name":"What to Know About the History of the Debt Ceiling","description":"The Biden Administration remains locked in a standoff with congressional Republicans over raising the federal debt ceiling, just two weeks before the nation is set to default on its obligations for the first time. 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