A breakdown of the debt ceiling debate

SPRINGFIELD, Mo. (KY3) - There’s a lot of talk going on in Congress about the debt ceiling and, while it seems like an issue that is settled in Washington, it could affect you in several ways.

The debt ceiling is how much money the federal government has to operate on. Over the years, the ceiling has been raised because spending is more than the taxes that come into the government. On January 19, 2023, the U.S. Government will reach it’s limit, hitting that debt ceiling. Treasury Secretary Janet Yellen says that the U.S. could float until June but a decision needs to be made quickly on whether or not Congress will increase the ceiling; raising the ceiling is like increasing your credit card limit when you charge too much money on the card versus paying down the credit card so you have more room to spend.

While Congress is working out a deal on whether to raise the ceiling, the government will need to prioritize how they’ll spend taxes as they come in, between federal employees salaries, social security benefits, Medicare and other programs or investments. In addition, the IRS may not be able to send out tax refunds.

If the debt ceiling is not raised, you may also see interest rates go up, the U.S. dollar could lose value and, as Americans lose confidence in the state of the economy, Wall Street could take a hit, which in turn would hurt investments like retirement accounts.

House Republicans have said they would ok temporarily raising the ceiling in exchange for spending cuts and other concessions, but the White House is not interested in negotiating and will only accept raising the debt ceiling.

Experts say ‘don’t panic.’ It’s common to have debate over the debt ceiling and often it is again raised so the government can go on with its business. But, there is new leadership in the House of Representatives, new rules and new party dynamics than in the past so many leaders in Washington are preparing for a battle.

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