Student Opinion: Uncertainty in Facing America’s Debt Ceiling

By Sabrina Dhanoya


31.4 trillion dollars—in hindsight, this amount of money sounds like a generous offer, but to America, it’s the price we are hoping to escape time and time again. 


This limit is known to be our country’s debt ceiling. 


Our country is familiar with the threat of the debt ceiling––it has the power to hinder the federal government’s ability to provide the American people with the financial support of Medicare and Social Security benefits. Once this limit is reached, the government has no choice but to take extraordinary measures and default.


The havoc of reaching the debt ceiling’s limit only begins with halting federal funds and causing a detrimental impact on our country’s economy. As we take into account how dependent our country is upon the debt threshold, we must fully consider how our intra-national and international markets will be affected by a potential default. Another important variable is our global relationships: many of them will suffer and diminish as a repercussion of having to default. 


But while the only solution seems to be cutting down our country’s spending, who bears the burden of these budget cuts? With this forthcoming threat, an internal dispute between the Republican and Democratic parties has spurred. Of course, this begins with each party committing their best efforts to cast fault or blame upon one another to take accountability. 


It is difficult, however, not to mention the fact that the U.S. debt rose by 7.8 trillion dollars under the Trump Administration. Within a Moody’s Analytic Report, it stated that if we were to face a default, our country will face similar macroeconomic consequences to the Great Recession; equivalent to a devastating 4 percent decline in GDP. 


The real question, though, is how our government ought to approach this issue. Our government can choose to raise the limit once again, or else suspend the debt ceiling by the deadline. 


According to federal economists, failing to raise the price ceiling will be catastrophic for our country’s well-being. We must ensure our government is thinking about this conflict in a sustainable manner by reflecting on the deficits and lingering-effect of financial insecurity they can create for future generations to come. It is these decisions that will ultimately determine whether or not we will be facing another unfathomable era of recession. 


Within the span of a few weeks, the Biden Administration has to make a definitive decision. This includes weighing the diminishing outcomes internationally, politically, and economically. When having to evaluate the next course of action for our monetary policy, our government may inevitably produce political instability within the minds of civilians. 


For example, it was found that as a result of increasing the debt limit in 2011 and 2013, political insecurity increased, suspending our nation’s trust in its government. The heightened uncertainty reduced business investment and GDP growth. If it wasn’t for this political insecurity, unemployment would have been 0.7 percent lower and there would have been 1.2 million more jobs. 


The threat of default has often been avoided. In 2011, our government confronted similar challenges and limits regarding our nation’s debt ceiling. From delaying the date to increasing and reinstating the price ceiling entirely as part of the Budget Control Act, our government has come to different solutions to this prevalent obstacle faced time and time again.


This issue has the potential to impact a diverse range of Americans who are dependent upon federally-funded programs. Government funds could certainly be received at a declined rate, but won’t necessarily put a complete stop on the flow of federal funds.


When approaching delicate international issues with a high magnitude of destructive outcomes, the government should put forth—not only their potential plan of action—but also a sense of security within the American people. The statistics are prevalent. Prevalent enough to strike fear and insecurity into Americans as it has prominently done before. Yes, the government might not currently be aware of what course of action they’re planning to take, but even at these stakes, it doesn’t justify leaving citizens in complete disarray.


When approaching precarious circumstances like this, we can’t predict our nation’s future and whether federal payments will be delayed or given a temporary solution like in previous years. As citizens, it’s natural to be cautious when encountering a federal conflict as complex as the debt ceiling. 


Our country may be staggeringly approaching the debt ceiling’s limit, but on behalf of the American people, we have reached our limit when left with only fragments of hope to hold onto, rather than a full sense of security enforced on behalf of our own government.


IMAGE from Freepik

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