The U.S. government has a limit on the amount of money it can borrow. That means it can run out of cash, if the cap on its borrowing capacity is not changed.
Washington is preparing to fight another big battle to raise or suspend the nation's debt limit, as last week, Treasury Secretary Janet Yellen warned that on Thursday, the U.S. will reach its existing borrowing capacity ceiling of $31.4 trillion.
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The U.S. acquires huge sums of money in borrowing by selling Treasury bonds to investors around the world and uses those funds to pay its existing financial obligations, including military salaries, welfare benefits and interest on government debt. Once the U.S. reaches this limit, the Treasury can take "extraordinary measures" - suspending some investments and swapping different types of debt - to try to stay under the cap for as long as possible. But sooner or later, the U.S. will have to borrow more heavily to pay its debts or default on its financial obligations, which could include defaulting on its own debt.
The responsibility for lifting or suspending the debt ceiling rests with Congress, which must achieve a simple majority in both the House of Representatives and the Senate to vote in favor of a change to the debt limit. The act of raising the debt limit has become an eternal struggle, as Republican lawmakers use it as leverage to impose budget cuts.
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