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STORY: BILL GALE: "Playing fire with the debt limit is at best dangerous and at worst could have serious negative consequences on the economy, on interest rates, and on the financial status of the government."
With the U.S. government having hit its $31.4 trillion borrowing limit this week, financial analysts are now trying to forecast how quickly Congress might strike a deal to avert a potentially catastrophic government default before the money runs out in the middle of the year.
Republicans in the U.S. House of Representatives are demanding spending cuts in exchange for a debt deal. Democratic President Joe Biden says Congress must raise the debt limit without conditions.
This isn't the first fight over the debt limit, and likely won't be the last. Previous showdowns have resulted in last-minute deals and the U.S. has never yet actually run out money to pay its bills and debts.
But the risks are real. Steven Ricchiuto is the chief U.S. economist with Mizuho Securities USA, and says even if the debt limit gets raised, the recurring fight comes with a cost.
"Look, I'm old. I've been in this business for a very, very long period of time. I've seen lots of these debt limit problems come and go. Can I tell you categorically it's not going to happen? No. Can I tell you it's a high probability they will come at an 11th-hour date and solve the crisis? That's usually the way it happens. But there's always brinkmanship involved and there's always some dislocations created more for the financial markets than for individuals themselves."
Other analysts bemoaned the fact that the U.S. has to have this crisis at all. Congress generally approves government spending when it passes funding packages through what are commonly called continuing resolutions. But then it has to have a separate vote on whether to raise the debt limit to borrow the funds needed to pay for what Congress has already approved.
Bill Gale is senior fellow at the Brookings Institution.
"So, there's no... there's no way that government can go rogue and spend lots of its own money without congressional approval. So, the debt limit is not really necessary. And having it out there just creates political and economic dangers that we should not have to spend our time dealing with."
The U.S. Treasury department this week said it began taking what it called "extraordinary measures" to keep the government funded, estimating it can keep funds flowing through June.