Federal Debt Debate: Implications for the Economy

U.S. debt now stands at $31.5 trillion — illustrated by this infographic — as the federal government officially hit its debt ceiling on Jan. 19. Secretary of the Treasury Janet Yellen has said “extraordinary measures” should keep the federal government open for a few more months, but that the timeline was subject to “considerable uncertainty.”

Soaring federal debt poses a threat to the nation’s long-term well-being. (Current interest rates could push the debt to 300% of U.S. GDP within 30 years, according to estimates.) But experts say if the government defaults, there would be a major recession, a spike in borrowing costs, a sharp sell-off in stocks, and rampant unemployment.

President Biden and Yellen have called on Congress to raise the debt limit with no strings attached. U.S. House Speaker Kevin McCarthy (R-Calif.) wants to “look at the places that we can change our behavior” when it comes to federal spending. According to reports, there’s a split in the House GOP regarding how hard a line to take when it comes to raising the debt ceiling. 1/25/2023