The US is on the verge of default again, but the solution is traditional – raising the debt limit
27 March 2025 10:20
The United States of America is on the verge of a partial or even complete default. The Congressional Budget Office (CBO) has issued an urgent forecast that is of serious concern not only to the United States but also to the global financial community, "Komersant Ukrainian" reports citing Reuters.
Experts warn that the state risks failing to fulfill its debt obligations for a huge amount of 36.6 trillion dollars. According to experts, a critical situation may arise this summer, most likely in August or September, although there is a risk of default in late May or June.
Forecasting is difficult due to constant changes in state budget revenues and expenditures. The situation may be affected by the timing of tax payments, additional financial revenues, and extraordinary measures that the government may take to temporarily resolve debt issues.
Читайте нас у Telegram: головні новини коротко
How to avoid default
It’s worth noting that the United States faces a similar situation quite regularly. Traditionally, this is resolved by raising the debt limit. However, this is always accompanied by a political crisis, which also affects the markets.
If the Congress does not decide to raise the debt limit, the US government will be in a critical situation. This could lead to delays in budget payments, a partial or complete inability to fulfill financial obligations, and, in the worst-case scenario, a full-fledged default.
The position of the Republicans, who control the House of Representatives and the Senate, is particularly worrisome in the United States. So far, they have not made public a clear action plan to resolve the debt problem. Such delays in negotiations have in the past led to financial market turmoil and downgrades in the US government’s credit ratings.
US public debt
The US public debt is the total amount of financial obligations of the federal government, which is formed due to the excess of government spending over revenues. It consists of two main parts: the public debt, which includes bonds held by private investors, foreign governments, pension funds and financial institutions, and the domestic debt, which is the government’s obligations to its own trust funds, including Social Security.
The figure quoted by the CBO – $36.6 trillion – is also the public debt, which continues to grow. This is due to chronic budget deficits, economic crises, and increased debt service costs due to the Federal Reserve’s interest rate hikes. A significant portion of the debt is held by both domestic and foreign creditors, with China, Japan, and the EU playing a special role.
The rising debt is causing concern in the US about its impact on the economy, as it increases the burden on the budget due to interest payments, which could lead to a reduction in funding for social programs and the defense sector. At the same time, although the excessive debt burden poses potential macroeconomic risks, the US remains the main issuer of the global reserve currency, and its bonds are considered one of the most reliable financial instruments.
Читайте нас у Telegram: головні новини коротко
