Does it matter if Congress doesn't raise the debt ceiling?
Photo by Alex Wong/Getty Images
President Obama and congressional Republicans have both drawn a line in the sand over the upcoming series of budget battles, the first of which is whether Congress will raise the country's debt limit - which is expected to hit as early as Feb. 15.
The president is refusing to negotiate, imploring Congress to "do its job."
"They will not collect a ransom in exchange for not crashing the American economy," he recently said of Republicans. "The full faith and credit of the United States of America is not a bargaining chip."
House Republicans, meanwhile, will hold a vote Wednesday that, if it eventually passes both the House and Senate, would raise the debt ceiling for about three months, giving lawmakers some time to figure out how to avoid default. However, while kicking the can down the road offers a brief respite from one fiscal hurdle, there are still two others that Congress is facing.
In addition to the debt ceiling, lawmakers also have to deal with averting $1.2 trillion in self-imposed automatic spending cuts, or sequester, that takes effect on March 1, and they'll also have to pass a bill to extend government funding, which currently expires at the end of March.
As both sides are worlds apart on all three issues, any failure to reach an agreement over three budget-related emergencies in the next few months could have dire consequences for your pocketbook.
The Debt Ceiling
The primer: Barring congressional passage of a debt ceiling increase, the $16.4 trillion debt limit is expected to be hit between mid-February and early March. It is a discretionary number set by Congress on the amount the Treasury is allowed to borrow to pay bills already incurred. (After difficult negotiations, Congress raised it in 2011 by $2 trillion.) Republicans want at least one dollar of spending cuts for every dollar the debt ceiling is lifted. Mr. Obama, however, argues that spending cuts are a separate discussion, since the debt limit has nothing to do with future spending. He recently described it this way: "You don't go out to dinner, then eat all you want and then leave without paying the check."
The impact: The Treasury would be able to pay only the amount that comes into the Treasury each day from tax receipts, fees and market transactions. Steve Bell with the Bipartisan Policy Center said the in the month of February, the Treasury would be expected to pay out $175 billion more worth of expenses than it takes in. That means a lot of bills - 12 percent of the Gross Domestic Product - won't be able to be paid.
In a letter to House Speaker John Boehner, Treasury Secretary Timothy Geithner outlined some specifics of things that could go unpaid. "These include payments for Social Security; Supplemental Security Income; Medicare; Medicaid; national security needs, including military salaries, military retirement, veterans' benefits, and defense contractors; income tax refunds; federal employee salaries and retirement; law enforcement and operation of the justice system; unemployment insurance; disaster relief; goods and services sold to the government under contracts with small and large businesses; and many others," he wrote.
It would be difficult to predict which receipts would be paid and which would not, Bell said, noting that the Treasury Department processes between two and three million transactions each day, all of them computer-generated. The federal agencies, Bell said, submits its invoices to the Treasury and the Treasury disburses funds upon receipt. It's a computer-generated first-come, first-serve system and not possible to prioritize which invoices should be paid.
While the country has never defaulted, economists and analysts warn of dire consequences because it means a lot of uncertainty in the marketplace and the economy as a lot of people will go unpaid. Stan Collender, who has worked for the House and Senate Budget Committees, said default would create "a lot of uncertainty" in the marketplace and cause "hardships" for Americans.
- no previous page
- next
1/3
Popular in Politics
- Officials on Benghazi: "We made mistakes, but without malice" 429 Comments
- Poll: Most think IRS targeting was deliberate 170 Comments
- Top IRS official to invoke 5th Amendment at congressional testimony 118 Comments
- Obama: "Full focus" is on recovery from Oklahoma tornado 82 Comments
- Former IRS chief: "I can't say" what led to IRS targeting
- Senate committee approves immigration bill
- Va. GOP candidate: Planned Parenthood "more lethal" for blacks than KKK 1177 Comments
- IRS scandal highlights leadership vacancies
This solves absolutely nothing.
I think Boehner did this just to keep the American people from descending on Washington; ( and him in particular) for illegally refusing to create a balanced budget and holding this country hostage since January 20, 2009.
Obama finally admitted that Boehner's tactics are nothing but attempts to blackmail Congress and the Senate to get own way.
This guy is so stupid; that even after four years, he still does not get that raising the debt ceiling is to provide funds for the MONEY CONGRESS HAS ALREADY SPENT.
He has been trying to convince the American people for the last four years that our next budget; with all it's cuts and increases,is going to have an effect on our current national debt.
Wrong answer.!!
However, I'm beginning to think he honestly believes this himself.
Talk about being stuck.!
This just goes to show you how flawed Boehner's actions really are.
Congress and the Senate need to get their collective ba**s together and shoot this idiot down once and for all.!!
The debt ceiling should go up a little but it would be better to increase the debt ceiling at a rate like Reagan increased it, like a couple of hundred billion a year. Definitely the rate of increase should decline from what it was last year and decline further from here on.
Debts such as interest on loans to foreign countries should be paid first and on time so that the "full faith and credit of the United States" is continued. If there is anything left over after making payments go ahead and allocate it to this or that project or dream that is part of an approved budget.
If after bills are paid up available capital is short, defer or delay projects scheduled and/or budgeted until such time they can be afforded.
Measures will be hard on Americans. Americans can handle responsibility.
He's going to steamroll the baggers.
Watch.
==============================================
You need to get a life, what you really mean is after three recounts and democrats lawyers getting the votes of absentee overseas military voters thrown out for thing like missing postmarks and smudged signitures they STILL didn't win and so like ganster thugs wanted to keep recounting and cheating until they win???? Where in the US constitution or the state of Floridas constitution do outright voter fraud and endless recounts are allowed. Pathetic....
--------------------------------------------------------------
Define "huge margin"???? since really a simple shift of about 1.5% of the votes cast would have sent Obama packing right?
All we have done, at this point, is kick the can down the road.
We cannot continue to do that, as the debt is now very near the GDP. That means we are, on the verge of total insolvency, as a nation. Going over that cliff of insolvency, will bankrupt all of us........and destroy America forever.
If it is going to take a big fight, to rein in the spending, then let's have a big fight now, and avoid a civil war, later. Obama doesn't care. he would gladly have tens of thousands die to get his way. That shouldn't be necessary. We should be able to look back at history, and not repeat Lincoln's huge error in judgment.
----------------------------------------------------------------
What's your point and why didn't they do it "BEFORE" the collapse????