USA: default due to debt limit threatens between July and September

US Capitol (in January 2019)

Photo: Zach Gibson/ AFP

Every few years there is a dispute in the USA about raising the debt limit.

What sounds bureaucratic is in fact a considerable means of exerting political pressure.

Because without this step, there is a risk of the country defaulting, with hardly foreseeable consequences.

According to estimates by the independent budget office of the US Congress, without raising the debt ceiling between July and September, the government in Washington could face just such a default.

That's according to a forecast released by the Congressional Budget Office on Wednesday.

Depending on the development of certain factors, this point could also be reached earlier, it said.

The US Treasury Department had previously warned that a default was imminent by early June at the latest.

In the United States, Congress sets a debt ceiling at irregular intervals and determines how much money the state can borrow.

The debt limit so far is around 31.4 trillion US dollars (around 29 trillion euros).

Block hardliners – McCarthy negotiates

In the meantime, the applicable debt ceiling has been reached in the USA and the US Treasury Department has to tap into the reserves – because the USA is no longer allowed to take on any more debt to pay its bills.

If the debt ceiling is not raised soon, the US government could default.

That could plunge the global economy into a crisis.

Among the Republicans in the House of Representatives, however, some hardliners are blocking the issue.

Talks are ongoing between the administration and Congress, including at the highest level between President Joe Biden and Republican House Speaker Kevin McCarthy.

Both recently expressed confidence that an agreement would be reached in the end.

Biden said he would not allow a default to occur and damage confidence in the United States' creditworthiness.

jok/dpa