Mint explainer: How partisan politics hijacked the US debt ceiling

Mint explains the developed crisis.

• The debt ceiling is a restriction by the US legislature on how much money the government can borrow to run its social programs, finance the military, and pay off earlier debts. The credit limit was introduced in 1917.
• The vote to raise the debt ceiling was seen as a routine political measure. According to the Washington Post, since 1960 the legislature has intervened to raise the debt ceiling about 78 times as the national debt has increased. In 2021, this is increased to $31.4 trillion.
• The debt ceiling has become a contentious issue in recent times as partisanship has hijacked the once routine process. The Republican, seen as the party of limited government, has demanded spending cuts in exchange for President Joe Biden raising the debt ceiling again. President Biden has dug in his heels and refused to negotiate.
• His reluctance to negotiate with Republicans may stem from his experience as vice president in the Obama administration. In 2011, Republicans demanded similar cuts in government spending programs in exchange for voting to raise the debt ceiling. The prolonged standoff raised the risk of default and caused turmoil in financial markets. The US debt was downgraded from its top rating – AAA – as a result of the standoff.
• As the latest political impasse continues, Yellen warned that the US could exceed the debt limit as early as June 1. If this happens, America’s financial credibility will take a severe blow.
• Experts warn that financial markets will collapse and unemployment will rise dramatically, as the government will be unable to pay its workers or borrow money for social-security programs. Given the catastrophic impact, the US is unlikely to default on its debt despite its deeply partisan politics.