On Thursday, Jan. 19, the U.S. crossed over the $31.4 trillion limit set by Congress known as the debt ceiling. Although Congress has never failed to raise the debt ceiling when needed in the past, the current atmosphere in the chambers of Congress could be cause for concern.
The Maine Campus spoke with UMaine’s own Mark Brewer, professor and chair of the Department of Political Science, to gain some perspective on how the possibility of somehow failing to raise the debt ceiling and heading into uncharted territory would impact both the student body, the university and the rest of the world.
Reaching the U.S. debt limit has greater worldwide implications than many may realize.
“The United States dollar is kind of the global standard for currency,” Brewer explained. “It’s not like the dollar is just the American currency… commodities worldwide are priced in dollars. Most economists will tell you that it [failing to raise the debt ceiling] will almost certainly trigger a global recession.”
Perspectives regarding the intensity of the predicted recession differ, with time being a key factor in how negatively the global economy would be impacted.
In regard to the debt ceiling’s consequences for universities, federal financial aid is crucial for many students to afford schooling.
“Failing to raise the debt ceiling would make it pretty likely that any new federal student loans would not be dispersed,” Brewer said. “So, if you had a federal student loan, and you hadn’t received your chunk of that loan for that particular semester, then I don’t know that you would until the debt ceiling crisis was resolved.”
This means that sources of financial aid, such as the Federal Pell Grant, would potentially be put on the back burner if other funding areas are prioritized.
The university itself also receives a significant amount of federal grant money as an R1 institution. This funding could be halted if the government decreases its spending, likely suspending ongoing research projects.
“In some cases…particularly in the biological sciences where you’re dealing with living entities, pausing a project might not really be possible,” Brewer said.
As for what this may mean for graduating students, entering the workforce in a time of uncertainty can be concerning, as certain sectors could begin looking to cut costs, along with any job positions that are deemed non-essential.
“Some sectors are much more sensitive to economic downturns[…]say the financial industry is going to be much more impacted than something like healthcare because people are still going to be getting sick, regardless of whether we raise the debt ceiling or not,” Brewer explained.
Many possibilities loom as the uncertainty regarding the state of the debt ceiling remains.
“Failing to raise the debt ceiling could actually be a moot point because the Constitution says that the debt of the United States will never be questioned. It could be that…let’s say Congress refuses to raise the debt ceiling, Joe Biden as President could then just direct the treasury to keep paying debt payments,” Brewer said.
Brewer noted that this would be a less than ideal, messy approach, yet the “Constitution trumps Congressional statute,” so the federal government will have the ability to respond to the situation accordingly as it progresses.