[News Terms] The 'Debt Ceiling' That Triggered the US Default Crisis

The 'debt limit' refers to the maximum amount the U.S. federal government can borrow without congressional approval. It includes the total amount the government can borrow for Social Security and Medicare benefits, interest payments on national debt, tax refunds, and more. As of February last year, the U.S. debt limit stood at $31.381 trillion (approximately 42,000 trillion KRW).

Fundamentally operating under a chronic deficit structure, the U.S. federal government issues bonds to cover budget shortfalls. The authority to issue dollars lies with the Federal Reserve Board (FRB), and Congress sets a ceiling on federal government debt to maintain fiscal soundness and stabilize the value of the dollar. This system began in 1917.

U.S. Treasury Secretary Janet Yellen warned on the 15th (local time) that the country could default as early as the 1st of next month.
[Photo by AP Washington DC/ Yonhap News]

According to the U.S. Treasury Department, since 1960, the U.S. federal government's debt limit has been raised 78 times. Of these, 49 increases occurred under Republican presidents, and 29 under Democratic presidents. The federal government, which has spent more than its revenue almost every year, has borrowed money through issuing government bonds, with debt reaching the limit annually. When the debt reaches the limit, Congress can either raise the debt ceiling or temporarily suspend its application for a certain period.

During the Obama administration, opposition from the Republican Party against raising the debt limit led to delayed payments of salaries for public officials and soldiers. Ultimately, a dramatic agreement was reached two days before default, but the U.S. national credit rating was downgraded due to stock market crashes and falling government bond yields. It was also claimed that the delayed increase in the debt limit reduced the U.S. Gross Domestic Product (GDP) by 1% at that time.

On the 16th (local time), according to major foreign media including CNBC, U.S. President Joe Biden and House Speaker Kevin McCarthy, along with congressional leaders, held a White House meeting to negotiate the debt limit but failed to reach an agreement. In a letter sent to Congress the previous day, U.S. Treasury Secretary Janet Yellen warned, "If Congress does not raise or suspend the debt limit provisionally by early next month, tentatively by June 1, the Treasury will no longer be able to meet all government obligations." This means funds to pay salaries for public officials and military personnel or to operate health insurance will be depleted.

This content was produced with the assistance of AI translation services.