The US is, once again, poised to run up against the country's debt limit.

That means that the government is not allowed to borrow any more money - unless Congress agrees to suspend or change the cap, which currently stands at almost $31.4bn.

Typically that is what happens.

Since 1960, politicians have moved to raise, extend or revise the definition of the debt limit 78 times - including three just in the last six months.

But fresh tensions in Congress, where Republicans recently took control of the House of Representatives and are calling for spending cuts, have raised concerns that politicians will delay acting this time - potentially leading the US to intentionally default for the first time in its history.

So what would happen?

They will raise it. 

If the US defaulted on its public debt, the fallout would very likely be catastrophic, which is one reason all the previous Republican posturing and brinkmanship and Democratic hand-wringing resulted in raising the limit at the last possible moment.  Is it possible the nutcases in the so-called Freedom Caucus can actually force a default this time ("stuff it, let's see what happens...)?  Well, who knows?  Things have happened in the past decade no one ever thought could happen.

if they raise the debt ceiling -given the difficult economic times-then they will have to raise it forever.

If they raise it -and the chances are they will-then they need to scrap it.

Borrowing will only stop when the market refuses to lend

 

Nothing as the USA debt is payable in dollars. They simply up the ceiling and consider printing more. This is why its important to end the dollar being the world's "reserve" currency, as it gives them an unfair advantage.

In 2011 when Republicans pulled this stunt it ... "cost the government billions of dollars and damaged the nation’s international credibility." However it sent also sent Republican poll ratings plunging which ended it. So much for actually caring about deficit spending.

This is a game played by Republicans. They want to force Biden to make cuts in Scocial Security, Medicare, etc., things they do not like. Given the hard core republican crazies now in Congreess, it could get ugly as bankrupting the US would not bother those feather heads one bit. Still they have months before it gets serious.