How close is the United States to hitting the debt ceiling? How bad would that be?

For many years, raising the debt ceiling was routine. But as the political environment has become more polarized, tension over the debt ceiling has increased. The House used to employ the “Gephardt rule,” which required the debt ceiling to be raised when a budget resolution passed, but that was largely phased out during the 1990s.

During the debt ceiling battle in 2011, some argued that President Barack Obama had the power to unilaterally lift the debt ceiling. Former President Bill Clinton said at the time that if still in office he would invoke the 14th Amendment, which states that the validity of US debt should not be questioned, raise the debt ceiling of his own accord and force the courts to arrest him.

Mr. Obama and his lawyers disagreed and opted against this approach. After leaving office, Obama acknowledged that he and Treasury officials considered several creative contingency plans, such as minting a $1 trillion coin to pay off some of the national debt. In a 2017 interview, he called the idea “wacky.”

Ms. Yellen rejected the idea of ​​minting such a coin to deal with the debt limit during a House Financial Services hearing, arguing that the only way to address the borrowing limit is for Congress raises or suspends it.

The lack of a replacement is one of the main reasons why the debt ceiling has persisted. The United States could follow the Danish model and raise the debt ceiling to a stratospheric level. Some have also suggested it could also force the limit to gradually increase with new funding.

Few lawmakers from either party benefit from a vote on the debt ceiling, and failure to raise it would lead to economic disaster. While the political polarization in the United States shows no signs of abating, it often seems that the risk of an accidental default outweighs any fiscal responsibility encouraged by the debt ceiling.

Ms Yellen said she would support legislation to abolish the debt ceiling, but Mr Biden ruled out the possibility.

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