As Debt Ceiling Looms, Schatz Introduces Legislation To Avoid Catastrophic Default
Debt Ceiling Will Be Reinstated On January 2; Default Could Lead To A Recession
WASHINGTON – U.S. Senator Brian Schatz (D-Hawai‘i) today led a group of 17 colleagues in reintroducing the End the Threat of Default Act, legislation that would permanently remove the threat of a default by repealing the national debt ceiling, an arbitrary limit restricting the amount that the United States Treasury can borrow to pay its debts. In June 2023, the president signed legislation that suspended the statutory debt ceiling until January 2, 2025.
“Defaulting on our national debt would be an economic catastrophe for everyone, especially families, veterans, and seniors. Congress has the chance to debate federal spending, and it’s well before the bill comes due,” said Senator Schatz. “We need to stop playing this dangerous game with the nation’s economy and get rid of the debt ceiling for good.”
A default would be catastrophic and would likely trigger a recession. Military pay, Social Security and Medicare payments, and Treasury bond yields would all be disrupted.
In practice, the debt limit has no impact on government spending, which is authorized and approved through the federal budget and appropriations process. Instead, the ceiling restricts the U.S. Treasury from paying for expenditures already approved by Congress therefore requiring Congress to constantly raise the ceiling before it is reached. In recent years, this has become a politicized procedure that often leads to threats of defaulting on the government’s obligation to pay its bills.
The United States is one of only two democratic countries with a statutory debt ceiling, and the only one that could single-handedly cause a global recession. Since 1960, Congress has acted more than 75 times to raise, temporarily extend, or revise the definition of the debt limit. In 2011, the crisis surrounding raising the debt ceiling led credit rating agency Standard & Poor’s to downgrade the U.S. government’s credit rating for the first time ever. Fitch downgraded the U.S. government’s credit rating following debt limit brinksmanship in 2023.
In addition to Schatz, the bill is cosponsored by U.S. Senators Mazie K. Hirono (D-Hawai‘i), Sheldon Whitehouse (D-R.I.), Michael Bennet (D-Colo.), Chris Van Hollen (D-Md.), Dick Durbin (D-Ill.), Elizabeth Warren (D-Mass.), Chris Murphy (D-Conn.), John Fetterman (D-Pa.), Peter Welch (D-Vt.), Richard Blumenthal (D-Conn.), Tina Smith (D-Minn.), Ed Markey (D-Mass.), Jeanne Shaheen (D-N.H.), Angus King (I-Maine), Ben Ray Luján (D-N.M.), and Jack Reed (D-R.I.).
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