US debt ceiling: What is it and how devastating would a default be?
Efforts to prevent the United States reaching its debt limit and to avert a potentially catastrophic default on loan repayments on Wednesday move to the House of Representatives, where the vote on the proposal to raise the debt ceiling takes place.
President Joe Biden and leader of the House of Representatives, speaker Kevin McCarthy, had spent the Monday memorial day holiday shoring up support among Democrats and Republicans respectively for the agreement.
The pair had agreed a plan on Saturday for the debt limit to increase and for spending caps and work requirements to be introduced. The agreement between the leaders must now gain approval of the two chambers of congress in less than a week before the default deadline is reached on Monday.
A single opposition vote could derail progress through congress and bring the US into its first ever default, with potentially disastrous consequences for the global economy.
What’s happening this week?
Members of the Republican majority House of Representatives are to vote on the proposed agreement on Wednesday. If approved, the proposal will move to the Democrat-controlled Senate on Friday.
But it first faces an uphill battle in the House as Republican representatives have already voiced their opposition.
Ten far right leaning House Republicans are expected to vote no, believing controls on spending in the agreement to be insufficient. Republicans generally seek to shrink, rather than expand, the country’s debt.
Some Democrats too are unhappy with the deal. The deal’s planned 3.3% increase in defence spending may lead to members of both parties seeking amendments to make sure military spending rises in line with inflation, which in the US is just below 5%.
Passage in the House on Wednesday is key to bringing the vote to the Senate on Friday.
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What’s in the debt ceiling deal?
The main purpose of the deal is to increase the US debt limit from $31.4trn (£25.3trn). The agreement does this by suspending the borrowing limit until January 2025 – after the next US presidential elections – rather than setting a new level.
Biden and the Democrats have made concessions to Republicans in the hopes they will back a deal. As Republicans are sceptical of government spending and seek smaller government, the deal promises spending cuts and policy concessions.
Quite how deep those spending cuts are depends on who you ask.
The White House is saying government spending would come down by $1trn, though official figures have not been released. The New York Times are reporting cuts of $136bn (£109.7bn) will be made.
Under the agreement, some social welfare recipients will be subject to new work requirements.
The bill would also end the student loan freeze Biden introduced and require former students to recommence payments.
It also revokes funding for the US tax collection authority, the IRS. Democrats had dedicated $80bn for the authority to hire more employees to boost tax enforcement, collecting more funds to implement state spending plans.
Ultimately the agreement is trying to stop a government shutdown. A deal is needed because any extension, or pause in the debt limit, needs the approval of congress.
Why does defaulting matter?
As the world’s largest economy has never before defaulted the exact consequences are uncertain but are likely to be catastrophic to the US and global economy.
The US would run out of money and no longer be able to pay its bills. Civil servant wages, social welfare payments, health insurance – known as Medicare – would go unpaid.
If the US no longer pays interest on its bonds, IOUs it issued to raise funds, it would default on debt payments.
The country’s credit rating would go down If it defaults on debt payments. A vital way the country raises money – selling bonds – could be at risk as markets will see US government debt as insecure and charge more to lend to the US.
Economic research organisation Moody’s Analytics said a prolonged period where US bills can’t be paid would lead to a nearly 20% drop in stock prices, economic contraction of 4% and the loss of more than seven million jobs.
The White House Council of Economic Advisers estimated the economy could shrink by as much as 6.1% after such a prolonged period.
Global shocks
The country would likely enter recession, which would harm the global economy as the US trades with so much of the world and is the bedrock of the worldwide financial system.
A fall in the value of US bonds would also harm economies across the world as investors could become concerned about other countries defaulting and seek to be paid more to lend to other nations.
US bonds and stocks are owned by pension funds across the world and with a drop in their values would come a drop in pension values.
US Treasury Secretary Janet Yellen
When could default happen?
To prevent default an agreement must be reached by Monday 5 June, which the US Treasury Secretary, Janet Yellen, set as the deadline to raise the debt ceiling beyond the current $31.4trn (£25.3) limit.
A date as early as 1 June had been thought to be the default date before the precise deadline was set by Ms Yellen.
US
Harrison Butker: NFL distances itself from Kansas City Chiefs kicker’s speech on women as ‘homemakers’
The NFL has distanced itself from Kansas City Chiefs Harrison Butker’s controversial speech which has sparked a backlash after he suggested female graduates were most looking forward to becoming wives and mothers.
During a commencement speech to graduates at Benedictine College in Atchison, Kansas, the Super Bowl-winning kicker railed against abortion, called Pride month a “deadly sin”, and attacked lockdown measures during the COVID pandemic.
His remarks on women in the workplace went viral after he said they were told “the most diabolical lies” and he suggested one of their most important roles in life will be “homemaker”.
“Some of you may go on to lead successful careers in the world, but I would venture to guess that the majority of you are most excited about your marriage and the children you will bring into this world,” he said.
“I can tell you that my beautiful wife Isabelle would be the first to say that her life truly started when she started living her vocation as a wife and as a mother.”
The 28-year-old said his wife embraced “one of the most important titles of all. Homemaker.”
The Chiefs kicker railed against abortion, called Pride month an example of ‘deadly sins’ and attacked COVID lockdown measures. Pic: Mark J. Rebilas/USA TODAY Sports via Reuters
What has the NFL said in response?
In a statement, the NFL’s senior vice president and chief diversity and inclusion officer Jonathan Beane said the Chiefs kicker was speaking in “his personal capacity”.
He told People magazine: “His views are not those of the NFL as an organisation. The NFL is steadfast in our commitment to inclusion, which only makes our league stronger.”
During the 20-minute-long speech last week, Butker – who’s made his conservative Catholic beliefs well known – also referenced lyrics from Taylor Swift – who is dating his teammate Travis Kelce – and said “familiarity breeds contempt” when discussing how Catholic priests should not become “overly familiar” with their parishioners.
When speaking about faith, he said to have pride – before adding: “Not the deadly sins sort of Pride that has an entire month dedicated to it, but the true God-centered pride that is cooperating with the Holy Ghost to glorify him.”
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Star also hit out at US president
The kicker then attacked US President Joe Biden’s “delusional” stance on abortion, saying: “He has been so vocal in his support for the murder of innocent babies that I’m sure to many people it appears that you can be both Catholic and pro-choice.”
A Change.org petition calling for the Chiefs to dismiss Butker for “discriminatory remarks” has attracted more than 170,000 signatures online.
But his speech was also praised by former NFL wide receiver T.J. Moe, who said on social media: “Not a word Harrison Butker says here should be remotely controversial. He’s 100% correct.
“Those trying to convince women that being assistant VP of lending & intentionally childless at age 40 is more fulfilling than making a family and home are evil.”
US
Massachusetts teenager had cardiac arrest after eating one of spiciest crisps in world in viral challenge
A Massachusetts teenager died from a cardiac arrest after taking part in a challenge where he ate what was believed to be one of the spiciest crisps in the world.
Harris Wolobah, 14, from Worcester, died on 1 September last year after eating a Paqui chip as part of the manufacturer’s One Chip Challenge.
The challenge, popular on social media, involved eating supposedly one of the spiciest tortilla chips in the world, then bearing the heat for as long as possible before eating or drinking something else for relief.
It came individually wrapped and Paqui’s website previously said it is made from two of the hottest chilli peppers in the world – the Carolina Reaper and Scorpion.
An autopsy concluded the teenager died from a cardiopulmonary arrest “in the setting of recent ingestion of food substance with high capsaicin concentration”. Capsaicin is the component that gives chili peppers their heat.
Paqui has discontinued the One Chip Challenge after multiple reports of children being hospitalised. Pic: AP
But the Chief Office of the Medical Examiner also found Harris had an enlarged heart and myocardial bridging, where a major artery runs inside of the heart muscle instead of on its surface.
In a statement after the autopsy was released, Paqui said they were “deeply saddened” by the teen’s death, and “extend our condolences to his family and friends”.
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The Texas-based manufacturer added that because of the incident and others where teenagers were taken to hospital, they had stopped selling the spicy chip.
Keep up with all the latest news from the UK and around the world by following Sky News
“While the product adhered to food safety standards, out of an abundance of caution, we worked with retailers to voluntarily remove the product from shelves in September 2023, and the One Chip Challenge has been discontinued,” they said.
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Harris’s mother Lois Walobah told NBC10 Boston last year she was called to the school by a nurse and her son had told him a classmate gave him the chip, leaving him with a bad stomach ache.
They went home but later that afternoon his brother yelled Harris had passed out, she said.
He was taken to hospital where he was pronounced dead.
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