The US government is facing a crisis as it has already exceeded its spending limit, leaving it with no money to pay its bills or repay its debts. The Treasury Secretary, Janet L. Yellen, has warned that if the borrowing limit is not increased, the government will run out of money by June 1st, and the country will become cashless. This has led to the creation of a new term called the X date, which is the date of danger, as economic activities across the country could come to a standstill.
The US government has set a target of borrowing $726 billion in the current quarter, which is $449 billion higher than the estimate presented in January. However, the country’s budget deficit is very high, and the government’s expenditure is much higher than its earnings, forcing it to take loans to run the country. According to the Treasury Department, the government’s budget deficit had reached Rs 30 lakh crore in March 2023. The research center PEW has reported that America’s GDP was 121% in debt in 2022, highlighting the extent to which the government relies on debt for its expenses.
Politics has also played a role in the current crisis. The Republican Party, which won nine seats more than the Democratic Party in the US House of Representatives during last year’s midterm elections, has become an obstacle to Biden’s agenda to run the country. The bill to increase the limit of further lending to the government has been pending in the Upper House for a long time. The Republican Party member and speaker have refused to pass the bill, even after an hour-long conversation with Biden in February.
The Republicans have proposed raising the debt ceiling if Biden agrees to cut 14% of his health, climate change, and social programs, which he is not willing to accept. The dispute over the budget deficit could harm Biden’s party in the upcoming presidential elections. Republicans are constantly criticizing the Democrats on the economy.
Despite being the most powerful and richest country in the world, America has the highest debt compared to GDP. Last year, the GDP of America was 21.44 trillion dollars, while the debt was 27 trillion dollars. The main reasons for the increase in debt on America from 2019 to 2021 are the increase in unemployment, reduction in interest rate, and inflation. The government has compensated for inflation by taking loans instead of stopping expenditure, and a lot of money has been spent on being powerful in the world, including providing aid to Ukraine against Russia and dealing with China.