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Debt Ceiling Crisis

Context:

In little more than a week, the US government could default on its borrowings — an unprecedented situation that could potentially hit economies worldwide — if Congress doesn’t raise the nation’s debt ceiling.

About US Debt Ceiling:

It is the total amount the US government is allowed to borrow to finance its expenditure, such as paying salaries and welfare allowances.
Current limit: $31.4 trillion.
Introduced in: In 1917 when the US entered World War I.
Constitutionally, Congress controls the government’s purse strings.
Purpose:
1. To make it easier for the executive to operate without having to turn to Congress every time it wanted to spend
2. To allow the government to borrow as required as long as it is kept under the debt limit approved by Congress.

Possible impacts if the govt defaults:

The government would no longer have the money to function, and would have to decide who gets salaries, and how much.
Harm to the global leadership position of the USA and questions about its ability to defend national security interests.
US’s credit rating would be downgraded, making future borrowing more expensive.
Probable weakening of the dollar and the collapse of stock markets.

News Source: Indian Express

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