(NewsNation) — The U.S. has never defaulted on its debt because it failed to raise the debt ceiling, but that could change. The White House and GOP lawmakers got an extension on the expected deadline from Treasury Secretary Janet Yellen on Friday, but without a deal, chaos could ensue.
House Speaker Kevin McCarthy and Republican debt negotiators continue to grapple with President Joe Biden over the finer points of an agreement to raise the nation’s borrowing limit so the country can pay its bills.
If the two sides can’t agree on the terms, it could send the U.S. into a potentially catastrophic default that would send economic shockwaves across the world.
“In the short term, it would be very devastating to individuals and families,” said Bill Hoagland, senior vice president with the Bipartisan Policy Center. “Pension funds, IRAs, 401Ks, all would suffer immediately.”
What to know about the showdown in Washington as default looms
How did the debt get this high?
Now at more than $31 trillion, the national debt represents the federal government’s total outstanding borrowing over the nation’s history. It’s a number that has skyrocketed in recent years.
The total debt accrued since 2001 accounts for more than 80% of the outstanding debt today.
Over that period, the government has taken on more obligations, which policymakers have funded by borrowing money rather than paying with current revenues, Hoagland explained.
“Governments have been reluctant to control the level of spending offset by paying for it with taxes, particularly over the last few years,” he said.
Recent presidents on both sides of the aisle have added trillions to the national debt during their time in office, according to a NewsNation analysis of Treasury data. The debt added during former President Barack Obama’s two terms amounted to about $9.3 trillion. The debt rose by about $7.8 trillion during former President Donald Trump’s one term in office.
But those increases aren’t solely up to the president. Congress has its say, and other factors such as war and stimulus programs like those offered during the 2008 recession and the COVID-19 pandemic had a significant impact.
What do Republicans want?
Republicans on Capitol Hill are determined to cut spending and insist that 2024 government spending be less than it is today. They also want to cap spending over the next six years in order to rein in the ballooning debt they say is unsustainable.
GOP negotiators are also calling for stiffer work requirements for certain recipients of social benefits programs such as food stamps and Medicaid. Specifically, a bill House Republicans passed last month would increase work requirements to 20 hours a week for those between the ages of 50 and 56 who are receiving food stamps .
McCarthy has maintained that those provisions would only apply to able-bodied individuals without dependents.
As recently as Thursday, negotiators said work requirements remain a central sticking point.
GOP conservatives fume over possible debt ceiling compromises
What do Democrats want?
Biden was pushing for a deal that raises the debt ceiling with no strings attached, but has since launched negotiations.
The White House has offered to hold spending at 2023 levels, but hasn’t been willing to roll back spending next year.
Biden also wants to increase taxes on wealthy Americans and some companies, which McCarthy has said is out of the question.
House Democrats are against adding tougher work requirements to the deal, and have called the idea a “nonstarter,” although, Biden has reportedly signaled that he may be open to negotiating on that point.
Some Democrats have called on Biden to raise the debt ceiling on his own, citing a clause in the U.S. Constitution’s 14th Amendment. So far, the President has dismissed that untested legal theory.
Where do Americans stand?
Recent polls suggest Americans are divided along partisan lines when it comes to who’s at fault for the current situation.
About half (43%) of Americans would blame Biden if the government goes into default, while 45% would blame Republicans in Congress, according to a recent Marist College Poll. That divide was heavily split along party lines, although self-identified independent voters were more likely to blame Biden (47%) than the GOP (38%).
A new Fox News poll showed a similar divide, with 47% of those surveyed blaming Biden and 44% pointing the finger at congressional Republicans. Again, independents were more likely to blame Biden (51%) than Republicans (35%).
On specific points of disagreement, Americans appear to favor the Republicans’ position.
The vast majority of Americans (60%) say Congress should only raise the nation’s debt ceiling if it cuts spending at the same time, a CNN poll found. Just 24% of those surveyed said it should be raised “no matter what.”
But when it comes to the ongoing negotiations, neither side is winning many fans. About 60% think Biden has “not acted responsibly” while 64% say the same about congressional Republicans, according to the CNN survey.
Why is more national debt a concern?
As with any debt, the federal government has to make interest payments on the money it borrows. When the national debt rises, so does the total interest owed.
Last fiscal year, American taxpayers spent $475 billion in interest expenses on the national debt. That’s the highest dollar amount ever, and it’s expected to soar to $1.4 trillion by 2033.
Instead of going toward programs like Social Security and Medicare, those interest payments go to investors, many of whom are outside the U.S.
“This is reducing the ability of the federal government to make investments in those things that will benefit (Americans) in the future,” Hoagland said.
In other words, higher interest costs make it harder to invest in things like roads, highways and education. Hoagland likened it to a “tax on future generations.”
Debt service as a percentage of federal spending is still down from the 15% seen in the mid-1990s, but if interest rates continue to rise, as they have recently, that burden could increase.
The Associated Press contributed to this report.