WASHINGTON — President Joe Biden is set to reveal his budget proposal in Philadelphia on Thursday.
He is expected to call on Congress to adopt his plan which reduces the deficit by $3 trillion dollars over 10 years while increasing spending on issues like crime prevention and the salaries of federal workers.
The president is also expected to call for new taxes on some of the wealthiest Americans.
While presidents can only propose budgets — with Congress having the ultimate say — the budget reveal is reigniting a familiar debate over the debt limit.
WHAT IS IT?
As a reminder, the debt ceiling, or debt limit, is the amount of money the government can borrow to pay its bills. It's a bit like a credit card limit in that way.
Currently, the debt ceiling is $31.4 trillion dollars, which was reached in January.
For now, Treasury Secretary Janet Yellen is using what is known as "extraordinary measures," like limiting some investments in federal workers' retirement plans, to avoid a default. However, Yellen can only do that for a few more months.
With President Biden revealing his budget Thursday, the next phase of negotiations between Democrats and Republicans is set to begin. Republicans are seeking major spending cuts in exchange for raising the debt ceiling, and already the president's plan is being criticized by some conservatives.
Some Republicans are taking steps to advance legislation prioritizing what would get funded in the event of a default.
Economists have warned even a temporary default could crash the financial markets and put military pay and social security checks at risk.
WHEN WILL IT HAPPEN?
For the moment, we don't know precisely when the country is at risk of defaulting.
As a result, the debt limit fight remains a bit like a hurricane offshore, politically. Everyone knows it's there and that a showdown is coming. A specific date is unknown because it depends on how much money the government takes in this tax season.
According to the non-partisan Congressional Budget Office, however, a default will happen sometime between July and September unless Congress acts.
From a historical perspective, Congress has always figured out a way to raise the debt limit and avoid a default. Over the course of the last 13 years, there have been 10 debt limit fights, and in each one, the debt limit has been raised, with Democrats and Republicans solving the issue in some form or another.