U.S. hits borrowing limit as Congress debates raising debt ceiling

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• Geoff Bennett:

  Good evening, and welcome to the "NewsHour."

  The U.S. government hit its debt limit today, forcing the Treasury Department to resort to extraordinary measures to keep the government paying its bills and avoid the catastrophic consequences of a default.

  That's with the new GOP-led Congress setting the stage for a high-stakes showdown over raising the debt limit.

  Congressional correspondent Lisa Desjardins joins us with the latest.

  It is great to see you.

• Lisa Desjardins:

  Good to see you.

• Geoff Bennett:

  And for the unfamiliar, remind us what this means that the country has hit its debt limit, its debt ceiling.

• Lisa Desjardins:

  To use a cliche analogy, we have reached our credit card limit.

  However, unlike most of us, the Treasury has far more sweeping powers to deal with hitting its credit card limits. So they are using accounting mechanisms. They call them extraordinary measures — I'm starting to call them extra-ordinary, because they have to use them so often now — in order to keep us paying our bills.

  How long will that last? Well, the estimates are until summer. But I want to pay attention to a note that Secretary Yellen wrote in her letter today about what she thinks is ahead.

  She wrote — quote — as you can see right there — that: "The period of time that extraordinary measures may last is subject to considerable uncertainty."

  That means, essentially, no one really knows how long we can keep treading water.

• Geoff Bennett:

  So, the timing ahead is uncertain. Treasury is trying to buy time.

  But, back in 2011, as you well know, this sort of brinksmanship resulted in the U.S. having its credit rating downgraded for the first time in history, and Americans' retirement savings took a hit. What's the risk this time, Lisa?

• Lisa Desjardins:

  It's a very significant risk.

  A quick reminder, of course, that, first of all, most people believe that Treasury would pay the bonds, pay our creditors, but, really, the Treasury, my reporting a couple years ago, was, there really isn't a clear plan.

  So let's say they pay our bonds right off the bat with the money we have. But then they have to make choices, prioritize. Would it be that federal workers would have to be furloughed because agencies wouldn't get money? Is it benefit programs like Social Security, even, Medicare, food programs? Somebody would not get money, millions of people.

  And that, the problem is, could lead to a tipping in the economy, which, of course, people are still worried about recession. So all of those things, including interest rates, and then including the world economy, could just lead to an avalanche of problems throughout systems around the world.

• Geoff Bennett:

  Why are these hard-line Republican members of the House willing to play roulette with a still vulnerable economy? What's their political calculation here?

• Lisa Desjardins:

  I'm so happy to talk about this.

  They say this is one problem, dealing with the debt ceiling, but another one that they're more concerned about is the size of the debt itself.

  Here's how new Speaker Kevin McCarthy put it this week. And he used an example. He stressed the most recent omnibus spending bill, which really is one of the largest ever passed by Congress. Here's what he said.

• Rep. Kevin McCarthy (R-CA):

  They let two senators write a $1.7 trillion omni bill that no one got to see and jammed it through the middle of December. So you realize why we have a debt like we had been in the past? Why wouldn't we sit down now, set a budget, set a path to get us to a balanced budget, and let's start paying this debt off and make sure the future generation has as many opportunities as we do?

• Lisa Desjardins:

  A lot going on in those sentences.

  He said, why don't we sit down? What they're really saying is, we will not raise the debt ceiling until you agree to limits on spending. And they want significant limits on spending. But they say that the problem is so large.

  Let's look at where we are with the national debt. Now, here's — let's look over the history of the national debt relative to our economy, where we are. Look, we're almost right there at World War II levels right there in that 100 percent of our economy range. That's the end of last year.

  Let's look at what's forecast. This is from the Congressional Budget Office. Look at that. If nothing changes in how our Congress and government operate, that's where our debt will go, to areas that people say are uncharted and real danger to economy.

  That's why conservatives are doubling down. They want the debt, which is its own issue, connected to spending.

• Geoff Bennett:

  A lot of that spending happened during the Trump era. And those same Republicans weren't sounding like Kevin McCarthy sounded today. What gives?

• Lisa Desjardins:

  I was keeping track of those spending bills that many Republicans were passing, whether it's for the military or veterans.

  They had no problem on this sort of like buffet of federal dollars that they were passing at that point. But I think, right now, what's happening is, of course, they're coming into power. And those behind them, their core base, is saying, look, this is a problem. It is about their identity, in a way, right?

  They have — trying — they're trying to assert: We're those fiscal Republicans again.

  But they're also the combative Republicans that are willing to risk everything for brinksmanship. Those two things are coming into play right now. So let's talk about what we think could happen. What are the scenarios are ahead?

• Geoff Bennett:

  Yes, how is this likely to end up?

• Lisa Desjardins:

  OK. We don't know.

  But I just want to try to start — tee off these chaotic potentially months ahead with these ideas. Let's look at the scenarios that I want to map out for people. First of all, Republicans could potentially win out with this freeze that they want or cut to federal spending. But already we see industries and agencies worried about that scenario.

  Also, maybe there could be bipartisan measures to cut the budgets ahead. That is what happened in 2011, by the way. There was a deal to try and put up more guardrails on spending, or there could be no deal. There could be a complete standoff. One side or the other has to cave entirely.

  That's where we are right now, because, right now, the president is saying he will not negotiate. I have a feeling that whether these things are connected and press releases or not, there are going to have to be conversations about federal spending in the next few months.

  How much will Democrats give or not? How much will Republicans give or not? That is where everything comes down to it.

• Geoff Bennett:

  Well, for one thing, we know for sure that you will be tracking all of it.

  So, Lisa Desjardins, thanks so much for sharing that reporting. Good to see you.

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