(StraightNews.org) — The Republican Party has published its Limit, Save, Grow Act, raising the debt limit by $1.5 trillion while proposing $4.5 trillion in savings. The Biden administration has urged a debt limit increase, but Republicans refuse to back it unless it is accompanied by federal spending cuts. Biden has refused to negotiate the matter with House Speaker Kevin McCarthy, saying he would not compromise on spending.
President Biden told an audience in Maryland that the two parties have competing visions about the future of the American economy. Referring to Speaker McCarthy, the President said, “He proposed huge cuts in programs that millions of hard-working and middle-class Americans count on.” He described McCarthy’s agenda as “the same old trickle-down dressed up in MAGA clothing.”
The debt ceiling is a Congressionally agreed amount up to which the Treasury Department can borrow. If the Treasury is to exceed the limit, Congress must approve an increase. First introduced during World War I, its intent was to provide independence to the Treasury. It has been raised 78 times since its introduction – 49 times by Republican Presidents and 29 times under Democrats. Congress last increased the ceiling to $31.4 trillion in 2021.
The debt the government accrues results from borrowing to bridge the gap between tax income and government spending. Much of this spending is related to social welfare programs such as Medicare and Social Security, but the Department of Defense receives the bulk of the funds.
Government expenditure is divided into two categories – discretionary and mandatory. Mandatory spending accounts for 63% of the overall budget, with 30% allocated to discretionary spending. Lawmakers decide how to utilize the 30% and what programs to support.
If Congress does not raise the ceiling and America defaults, the result will send shockwaves around the world. It would also mean that the federal government could not pay its employees, and America’s credit rating would be downgraded. This would make it difficult for American businesses and individuals to borrow and send the nation into recession.
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