Debt ceiling problems: is the US facing a technical default?

Abstract

On January 19, 2023 political contradictions between Republicans and Democrats on the issues of the national debt ceiling and the growing budget deficit have once again brought the United States to the brink of a technical default. The article examines how the Treasury tried to push back the date of such a default. Two types of national debt (public debt and intragovernmental debt) and their role in maintaining the debt ceiling are analyzed. The paradoxes of decision-making in the budget process regarding the debt ceiling are considered. When adopting the budget, legislators already estimate the amount of the budget deficit that will be added to the debt, threats of technical default have become a bargaining chip in disputes about budget policy. This is especially evident in the conditions of divided government. Republicans with the majority in the House of Representatives actively played a card of budget deficit. After months of bitter struggle between the administration and republicans in Congress, the latter approved a bill that shifted the limit on the national debt to January 1, 2025. On June 3, the president signed it. The debt ceiling problem has been postponed, but not solved. Lawmakers did not go for the abolition of the "debt ceiling", which some budget experts consider necessary. Particular attention in the article is paid to how Congress has been trying for decades to legislate the problem of the budget deficit and the debt ceiling and how effective these attempts have been. The American decision-making mechanism in the budgetary sphere is increasingly coming to a standstill. Trust in treasuries allows the US government to attract the savings of its citizens and the world's savings. Each time, the protracted confrontations over the debt ceiling can make investors begin to doubt whether American treasuries are such a reliable asset.