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The US Hitting the Debt Ceiling Limit: Here’s Everything You Need to Know!

The US government just reached its $31.4 trillion debt ceiling. This has sparked concerns about the economic repercussions of lawmakers failing to strike an agreement to pay the US government’s debts. The US now has approximately six months to increase the debt ceiling or find another workable solution after the Treasury Department started using several “extraordinary measures” to prevent a government default on its obligations.

In this blog, we will explore the current situation of the US debt ceiling, what it is, why it matters, and the impacts of not raising it.

What Is The Debt Ceiling and Why Does It Matter? 

The debt ceiling is a legal limit set by Congress on how much the federal government can borrow. If the government exceeds this limit, it cannot legally borrow more money. As a result, it would have to default on its debt, which would have severe consequences for the economy and government programs. 

The debt ceiling has been increased multiple times in the past to allow the government to borrow more money and continue to meet its financial obligations.

The US Hitting the Debt Ceiling Limit: Here's Everything You Need to Know!


What Is The Story About The US Debt Ceiling?

The US debt ceiling has been a complex topic for many years. Simply put, when the government spends more money than it receives in taxes and other income, it must borrow money to make up for the difference. A legal cap on how much debt the government can owe is known as the debt ceiling.

Raising the debt ceiling has historically been a common practice, with both parties agreeing to raise the cap to prevent a possible default on the government’s debt. However, in recent years, the debate over raising the debt ceiling has become increasingly politicized, with some Republicans using the issue as leverage to demand spending cuts or other policy concessions from the Democrats.

In December 2021, the previous administration of President Trump and Republican Senate minority leader Mitch McConnell had extended the debt ceiling to $31.4tn. But now that Democrats are in charge of both chambers of Congress and the new Biden administration has taken office, the subject has again come up for debate. Some Republicans in the House of Representatives are using the debt ceiling as leverage for other policy changes, most notably, the important budget cuts.

As a result, the Treasury has been forced to take “extraordinary measures” to meet its debt obligations. Still, economists have warned that these measures can only provide a temporary reprieve, and a resolution needs to be reached soon to avoid a potential default on government debt.

What “Extraordinary Measures” Is The Treasury Taking To Satisfy Its Obligations?

With the country approaching its debt ceiling limit, the Treasury will take “extraordinary measures” to pay its commitments. These actions include modifying the Thrift Savings Plan for federal employees and suspending new investments in several government accounts. Additionally, the Treasury can attempt to pay the interest and principal on the nation’s debt first and other payments later. These short-term solutions can buy time for a few months, but a solution must be found quickly to prevent a possible default on the nation’s debt.

Why Is Congress Divided On Raising The Debt Ceiling Limit? 

The debate over raising the debt ceiling has become increasingly politicized in recent years, with some Republicans using the issue as leverage to demand spending cuts or other policy concessions from Democrats with no conditions, while some House Republicans are using the debt ceiling fight as leverage for other policy changes, such as significant budget reductions. This has caused differences among politicians on Capitol Hill and made the discussion on lifting the debt ceiling a heated one.

The US Hitting the Debt Ceiling Limit: Here's Everything You Need to Know!


Why Is There A Disagreement Over Raising The Debt Ceiling? 

The disagreement over raising the debt ceiling is primarily due to the politicization of the issue. In recent years, some Republicans have used the debt ceiling as leverage to demand spending cuts or other policy concessions from the Democrats. This has resulted in the debt ceiling becoming a point of contention, with the potential for a government shutdown or default if a resolution is not reached.

What Are The Impacts Of Not Raising The Debt Ceiling Limit?

If the US defaulted on its debt, there would be significant consequences for the economy and government initiatives like:

  1. Economic Slowdown: The value of bonds, stocks, and the US currency would all be at risk in the event of a government debt default, which would result in a severe downturn in the economy. The global market, which is currently dealing with high inflation and interest rates, a prospective recession, and other geopolitical issues, would be affected by this.
  2. Default on Government Debt: The most significant consequence of hitting the debt ceiling would be the government defaulting on its debt. This would mean that the government could not repay the borrowed money, which would be a historic first.
  3. Impact on Financial Markets: The US defaulting on its debt would significantly impact financial markets, and anyone with a 401(k) retirement account would be heavily affected. In the previous two days, the DOW Jones Industrial Average has already decreased by around 1,000 points as Wall Street braces itself for the impending shock.
  4. Loss of Investor Confidence: Given that US bonds have generally been considered to be among the safest investments, a default would probably lead investors to lose faith in the country’s capacity to make bond payments.
  5. Delays in Government Programs: If the government defaults on its debt, it will create delays in Social Security and Medicare payments and other important programs like veterans’ benefits and SNAP food assistance.
  6. Cuts to Government Programs: To raise the debt ceiling, House Republicans have started talking about reducing funding for social programs. Republicans have spoken about reducing Social Security and Medicare benefits, but they haven’t come to an agreement as a whole.
  7. Global Financial Crisis: Although no one is sure what would happen if the US defaulted on its debt, experts warn that it would probably have a significant impact on the world economy.
  8. Credit Rating Downgrade: Similar to the debt ceiling standoff in 2011, a default could result in a downgrade of the US credit rating, which would further impact the country’s ability to borrow money in the future.

The debt ceiling is a vital issue that has the potential to plunge the government into default. It is important that Congress reaches a resolution to raise the debt ceiling on time to avoid its severe consequences. The politicization of the issue in recent years has made it a contentious topic. Still, it is essential that both parties work together to find a solution that is in the country’s best interest.

As an individual, you can still safeguard your wealth from getting affected by this event by putting your faith in Secvolt. There are predictions that if the government does not come up with a solution, people will face adverse consequences by the month of June. However, Secvolt’s risk management system makes it immune from any such economic downturns and, hence, also makes it the best option for you. 

For more information, visit www.secvolt.com.

Frequently Asked Questions

  1. What is the debt ceiling? 

The debt ceiling is a legal restriction imposed by Congress on the amount of money the federal government can borrow.

  1. Why does the debt ceiling matter?

If the government exceeds the debt ceiling limit, it cannot legally borrow more money, and it would have to default on its debt, which would have severe consequences for the economy and government programs.

  1. What happens if the debt ceiling is not raised?

The government won’t be able to pay its payments if the debt ceiling isn’t raised, and it may even fall into default.

Moreover, the Treasury will have to take “extraordinary measures” to continue paying its bills, but these measures are only temporary and will only provide a few months’ reprieve before the government runs out of money.

  1. Why is Congress divided over whether to raise the debt ceiling? 

The debate over raising the debt ceiling has become increasingly politicized in recent years, with some Republicans using the issue as leverage to demand spending cuts or other policy concessions from Democrats.

  1. What are the consequences of not raising the debt ceiling? 

If the US defaulted on its debt, the impact of the US debt ceiling not being raised would be as follows:

  • Economic downturn
  • Default on government debt
  • Impact on financial markets
  • Loss of investor confidence
  • Delays in government programs
  • Cuts to government programs
  • Global financial crisis
  • Credit rating downgrade
  1. How will the debt ceiling impact me? 

Bonds, stocks, and the US currency might all lose value if the US makes a debt default, which would be bad for financial markets and everyone with a 401(k) retirement plan. Social Security and Medicare members may also encounter payment delays and program reductions.

  1. Will there be a default on the US debt? 

While it is uncertain what will happen in the future, experts are hopeful that Congress will reach an agreement to raise the debt ceiling to avoid a default on the US federal debt.

  1. Is there a deadline for resolving the debt ceiling issue?

The effects won’t be seen by Americans until June 2023, according to Treasury Secretary Janet Yellen, but Congress has to act immediately to find a solution. An outright default is uncertain when the US encounters, although many experts anticipate a deadline in July or August.

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Ashish Verma

Ashish Verma is the founder and CTO of Secvolt, with close to 10 years of experience in the IT industry. He has been the technical backbone of the company and has worked tirelessly to make the technical infrastructure robust. He is a passionate entrepreneur who generates solutions that have the potential to bring change.

In order to ease the client’s interaction with Secvolt, he has strived to develop the business’s technological foundation and establish a user-friendly platform. Ashish has also contributed substantially to smoothening the company’s administration and ensuring that there are no lacunae in the broad structure of the organization. 

Early Years

Coming from a middle-class family, he was aware of the problems that people faced while using technology. He sought to create something that was simple to use yet had a powerful effect. As he studied computer science, he became eager to offer a solution to real issues. He began his professional career at Amdocs, where he gained expertise in client management while catering to more than 20 clients. Later, he moved to Citicorp, where he had exposure to the investment industry. His time at Amdocs and Citi enabled him to produce high-standard, efficient, and scalable technical infrastructure.

He left corporate jobs for his startup because he was passionate about working on the concept of a smart city platform. He expanded the concept internationally and even collaborated with Global Dignity-Kuwait. Things didn’t work out for him the first time. He states, “My failures didn’t stop me from experimenting and trying new things.” He rose from the ashes like a phoenix and founded FewerClicks, an End to End IT solution company.

He worked on the creation of Solster Finance, a decentralized financial platform based on the Solana blockchain. He created this platform single-handedly which has helped the team raise a $1M investment and a revenue of more than $5M within 6 months of launching. 

He has previously worked on many blockchain technologies and cryptocurrency ventures, which include Decentralized Finance Applications (Defi), Decentralized Applications (Dapps), File Contracts (SIA, record-keeper), Smart Contracts (rust, solidity), and NFT Development. His experience and effective communication have helped many team members understand Secvolt effectively and the underlying technology it is powered by.

He possesses the ideal combination of strategic thinking and excellent business insight. He is responsible for formulating technical aspects of the company’s strategy to guarantee alignment with business objectives. With his drive to experiment with new technologies, he has helped Secvolt achieve a competitive edge. Being in charge, Ashish never holds back in encouraging the different departments to make profitable use of technology, helping to grow as an unstoppable team at Secvolt!

Hanif Shaikh

Hanif Shaikh is the founder and CMO of Secvolt, with over 8 years of experience in the industry. He plays a crucial role when it comes to the growth of Secvolt. Since the beginning, he has acted as a mentor for each and every employee of the company, and he makes an effort to be accessible to his staff anytime they need him. 

Hanif first entered the Blockchain and Crypto world in 2016, and nothing has stopped him since. He views blockchain as a transparent platform that provides authority and accountability back to the people. He consistently believes that “overcommunication is better than miscommunication.” He has lived by this motto with his staff, clients, and networks.

Early Years

Hailing from Gujrat, a state in India, he is following his dream to contribute to making this world a better place. In the process, he has struggled, made some mistakes, and learned lessons from those mistakes to achieve success in life. His entrepreneurial attitude dates back to his childhood when he learned from his father’s business and aspired to have it all. He came from a humble background and had ambitions to succeed in life.

He has developed two successful businesses from scratch, and in the process, he has inspired young people to start their own businesses. He was an integral part of the Quora Mumbai Meetups and helped it become a great success in a short period of time. Later, he began organizing meetups to raise awareness about blockchain, cryptocurrencies, and their applications. He also shared his knowledge of ICOs, highlighted reputable ICOs, and established a small cryptocurrency community on WhatsApp groups.

He chose to go on a Blockchain Tour in India in 2019 and met some fascinating people. Throughout his journey, he has been able to build an extensive and robust network that has aided Secvolt’s growth. Because of his expertise and understanding of the Crypto Industry, he has been featured on several news channels and has advised the youth on the subject.

He is in charge of the company’s marketing operations and is responsible for developing its marketing strategy and vision. He oversees a group of passionate marketing professionals and plans promotional strategies with the goal of making  Secvolt a global brand. 

He is a perfect blend of a practical attitude and innovative business acumen. He believes in the ability of individuals to perform exceptionally well when given an environment to experiment and explore their passions; a culture that he has built at Secvolt.

Divakar Choudhary

Divakar Choudhary is the founder and CEO of Secvolt who has been trading for more than six years now. He started the business in 2018 with the conviction that if anybody could dominate the market, it was him. He poured all of himself into the business and turned Secvolt into a market-beating machine.

Divakar developed the fundamental quant models that perform risk management and capture alpha using his skills from the previous organization and his time spent in the market. In order to make the system effective, he backtested risk mitigation algorithms and worked on them for more than 4 years to produce results.

Early Years

He began his crypto journey in 2013 after getting his first gaming Laptop and melded in with the Blockchain community like sunbeams on the ocean. He created many YouTube channels at the age of 15 and businesses by the time he was 17. Technology has always piqued Divakar’s interest. He endeavored and succeeded at freelancing in his effort to achieve financial independence. However, he soon realized that freelancing would always keep him in the rat race, and the only way out would be to build a machine yielding generational wealth.

Soon, he started trading using his own capital but suffered a loss in the market. He says, “95% of people lose money & the rest 5% make money from the loss of those 95%.” He then began working on an effective technique to be included in this 5% after losing part of his own assets during the early stages of trading. He began evaluating quant strategies using statistical models.

With his methodology, he once produced a 20% ROI in a single month. With the zeal of creating something exceptional, he borrowed money from friends and family and generated decent returns for them using primitive quant models. Month after month, the system’s efficiency and the competence of the man behind it allowed for excellent market returns.

In the beginning, Divakar worked on his laptop for over 18 hours. It took every ounce of his energy as he executed about 530+ deals daily for 4 years to create this company from the ground up. In 2021, he increased his volume by 827%, trading a total of $52 million and hitting a single account.

In his words-

“What does becoming “THAT” GUY mean to you? Who did you need when you were young? Be that person!”

He is a perfect example of someone who followed his passion and made a fortune from it! He dreamt of creating generational wealth as a youngster, envisioned it as an adult, and is now making it a reality with Secvolt!