GOP partisanship could trigger first-ever US default

Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington, DC shares his perspective on US politics:

What does it mean that the US has hit its borrowing limit?

Well, the US this week hit its statutorily created debt limit, meaning that because of all the money that it borrowed during the course of the pandemic and the fact that it's borrowing hundreds of billions of dollars a year spending more than it takes in tax revenues, it hit its $31.5 trillion debt limit, which means that the US is now in a situation that it cannot issue new debt until Congress acts to raise the debt limit. However, Congress does not want to raise the debt limit, and there are a couple episodes during 2011 and 2013 where Congress came very, very close to the date where it would've potentially defaulted for the first time ever by not making payments to creditors.

Treasury Secretary Janet Yellen has set that due to what they call extraordinary measures, a couple of tricks, financial tricks that they use in order to extend the time before the US actually hits its borrowing limit, it's likely they can continue to finance the cost of running the government until at least early June, but after that point, it's anyone's guess when the US will default creating potential market chaos for this first ever event. So this is going to be a major storyline for US politics this year as President Biden attempts to negotiate this deal with Speaker Kevin McCarthy and a whole bunch of new freshman members of Congress, Republicans who don't want to vote for the debt limit and could be a potential stumbling block in a potentially weakening US economy later this year. Thanks for watching. This has been US politics in a little over 60 seconds.