As Debt Ceiling Looms, Durbin Joins Introduction Of Legislation To Avoid Catastrophic Default
The debt ceiling will be reinstated on January 2, and default could lead to a recession
WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL) today joined U.S. Senator Brian Schatz (D-HI) and 16 colleagues in introducing the End the Threat of Default Act, legislation that would permanently remove the threat of a default by repealing the national debt ceiling, an arbitrary limit restricting the amount that the United States Treasury can borrow to pay its debts. In June 2023, President Biden signed legislation that suspended the statutory debt ceiling until January 2, 2025.
“Defaulting on the debt would send the economy into a tail spin, leading to catastrophic consequences for Americans. Using the threat of default as a political tool is fiscally irresponsible. We cannot afford to have our economy held hostage,” said Durbin. “I’m joining my colleagues to introduce legislation that would stop this brinksmanship and end the threat of default for good.”
A default would be catastrophic and would likely trigger a recession. Military pay, Social Security and Medicare payments, and Treasury bond yields would all be disrupted.
In practice, the debt limit has no impact on government spending, which is authorized and approved through the federal budget and appropriations process. Instead, the ceiling restricts the U.S. Treasury from paying for expenditures already approved by Congress therefore requiring Congress to constantly raise the ceiling before it is reached. In recent years, this has become a politicized procedure that often leads to threats of defaulting on the government’s obligation to pay its bills.
The United States is one of only two democratic countries with a statutory debt ceiling, and the only one that could single-handedly cause a global recession. Since 1960, Congress has acted more than 75 times to raise, temporarily extend, or revise the definition of the debt limit. In 2011, the crisis surrounding raising the debt ceiling led credit rating agency Standard & Poor’s to downgrade the U.S. government’s credit rating for the first time ever. Fitch downgraded the U.S. government’s credit rating following debt limit brinksmanship in 2023.
In addition to Durbin and Schatz, the bill is cosponsored by U.S. Senators Mazie K. Hirono (D-HI), Sheldon Whitehouse (D-RI), Michael Bennet (D-CO), Chris Van Hollen (D-MD), Elizabeth Warren (D-MA), Chris Murphy (D-CT), John Fetterman (D-PA), Peter Welch (D-VT), Richard Blumenthal (D-CT), Tina Smith (D-MN), Ed Markey (D-MA), Jeanne Shaheen (D-NH), Angus King (I-ME), Ben Ray Luján (D-NM), and Jack Reed (D-RI).
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