Debt Ceiling: House Bill Passes, Impasse Continues

The U.S. House of Representatives on April 26th narrowly passed a bill to raise the debt ceiling, but the potentially market-rattling issue remains far from resolved.

The debt ceiling is the cap that Congress sets for the total amount of debt that the United States can accumulate. It was lifted to $31.4 trillion in December 2021. That cap was hit on January 19th of this year and since then the Treasury Department has been taking so-called "extraordinary measures" to avoid a government default. But those accounting measures are temporary and are expected to run out this summer, raising the pressure on Congress to raise or suspend the debt ceiling before a potential default that likely would be catastrophic for the economy.

Democrats and Republicans have been in a standoff over what to do since the limit was reached in January. President Joe Biden and congressional Democrats have insisted that they will support only a "clean" debt ceiling bill that has no strings attached. Republicans have said they will support only a debt ceiling increase that is paired with significant spending cuts. Biden met with House Speaker Kevin McCarthy (R-Calif.) on February 1st, but there have been no discussions about a compromise since then.