TEXAS, USA — The U.S. hit its debt ceiling on Thursday, Jan. 19., reaching a total debt of $31.4 trillion.
Now, the Treasury Department has temporary options to pay bills. They include using cash on hand or spending any incoming revenues, such as those during tax season, which starts Jan. 23.
It can also use so-called “extraordinary measures,” which can work to free up money in the short term.
Perryman group economist Ray Perryman told 6 News if these options fail, the government will go into a 'default' which would hit the economy extremely hard.
"There's no type of crisis associated with this, but interest payments are already high, they limit our flexibility, they limit the funds that are available for things like roads, and education, defense and security and those kinds of things. So it does have an impact on us going forward," Perryman explained.
A default would occur if the U.S. runs out of money to meet all of its financial obligations on time.
Some federal benefits like social security, Medicare and Medicaid could come to a stop. Then, recession could become very likely.
Perryman believes the US needs to do a better job managing the budget.
"I think we're a long way from a balance budget, but we can make better spending priorities, better priorities of revenue, and that's sort of thing. It's gonna take both parties working together and it's gonna take looking beyond the next election." Perryman continued.
The Treasury Department will now begin using "extraordinary measures" to continue paying the government's obligations. Those options are expected to be spent by June.