US Treasury Secretary Janet Yellen announced that the United States may need to take "extraordinary measures" to avoid a default starting next week when it is expected to reach the current debt ceiling set by Congress.
In a letter to congressional leaders, she stated that "failure to meet government obligations would cause irreparable harm to the US economy and the livelihoods of all Americans, as well as global financial stability," noting that the US is expected to hit its debt limit on Thursday, the 19th of this month. The maximum allowed debt for the US is $31.4 trillion, and as of Saturday, it reached $31.38 trillion according to the latest data on the US Treasury Department's website, meaning that each person in America holds more than $94,000 of this debt.
US public debt represents the amounts borrowed by the federal government to cover necessary expenditures. It consists of various types of debt, including "marketable securities" like Treasury bonds and notes, and "non-marketable" securities such as bonds guaranteed by the federal government that are not affected by inflation, which are invested in by investors, governments, and large funds.
A US default would not only impact the federal government but would also affect the economy and Americans, according to The Balance. A default would lead to increased interest rates in the US, which means rising prices and a contribution to inflation, placing a direct burden on Americans. Numerous programs and services provided by the federal government, particularly "Social Security and Medicare," would be affected, along with many small and medium-sized businesses that rely on federal loans, while the payment of federal employee salaries would halt.
These combined factors could affect consumer spending in the US, leading to the closure of many businesses and potentially plunging the country into a significant recession.
