The US government is at risk of default, now that the federal debt ceiling legislation is officially in effect once again.
According to Bloomberg, the legislation became effective again on Sunday, after being suspended for two years, while lawmakers have not yet determined how they will avoid a potential default later this year.
In 2019, the amount that the federal government is allowed to borrow was set at $22 trillion, with the amount adjusted to the current level of debt, which rose at the end of June 2021 to $28.5 trillion.
According to Bloomberg, the current situation is putting pressure on Congress to find a solution that will allow the government to continue borrowing, and if no action is taken, the Treasury will have to go to extremes, as the department has in the accounts $450 billion in funds.
"The time has come when it is necessary to bring this problem to the attention of members of Congress and come to the negotiating table," said David Wilcox, senior fellow at the Peterson Institute for Global Economics.
In August 2019, the debt ceiling was temporarily suspended for two years as part of a congressional balance sheet agreement, but the legislation took effect again, so the United States faces the risk of default next October unless an agreement is reached.
And the Treasury Department already began taking special measures last Friday to support liquidity, as officials stopped selling securities to the state and local government chain, which helps local authorities invest bond proceeds.
Other options for the Treasury include suspending new investment in funds intended for retired public sector workers.
Other alternatives also include entering into negotiations with Republicans to increase the ceiling in exchange for agreeing to some of their preferred budget items, or linking the ceiling to other bills that need to be passed.
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