Update: As of 10:30 pm, Wednesday, October 16, 2013, the motion to reopen the government and to raise the debt ceiling passed the Senate (81-18) and the House (285-144). Only Republicans in both houses voted against the measure. The motion passed on the 16th day of the government shutdown and two hours before the debt ceiling deadline. President Obama signed the bill Thursday morning and many federal workers returned to work.
Update: The Senate announced that they had reached a deal to reopen the government and to raise the debt ceiling, on Day 16 of the shutdown and a day before the default deadline. In order to avoid default, the Senate and House must approve the agreement and send it to President Obama’s desk before 11:59 tonight.
In case you haven’t heard, if Congress isn’t able to come to an agreement by Thursday, October 17, we’re going to hit the debt ceiling. If you have no idea what’s going on, why you should care or if you just want more/different information, read on!
What is the debt ceiling?
The debt ceiling or limit is “the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations” (U.S. Department of the Treasury).
These legal obligations include Social Security and Medicare benefits, tax refunds, military salaries and more.
But we have a spending problem, so isn’t raising the debt ceiling a bad thing?
Contrary to popular belief, raising the debt ceiling doesn’t mean that the government can spend more money; it just pays for bills incurred in the previous fiscal year. According to the Constitution, Congress has the power of the purse1. They sit down every session and come up with a budget for the upcoming fiscal year. If Congress doesn’t raise the debt ceiling, it is basically refusing to pay the bills it authorized last year. Republicans believe that the debate should be delayed to focus on issues they believe are more pressing, like Obamacare.
What happens if we don’t raise the debt ceiling?
Failing to raise the debt ceiling would mean that for the first time in history, the U.S. government would be unable to pay its bills on time. This might not sound like a big deal, but if the debt ceiling is not raised on time, there will likely be a huge impact on the global markets, possibly throwing us back into a recession. People and countries (most notably China) that buy government debt could also raise our interest rates.
What are the President and Democrats saying?
President Obama has criticized Congressional Republicans, saying “It wouldn’t be wise to just kick the debt-ceiling can down the road for a couple months… it would become more expensive for everyone in America to borrow money.”
Sen. Chuck Schumer (NY) took a very bleak view of the situation: “The debt ceiling is such a calamitous possibility that you could go to a recession or even a depression worse than Lehman and AIG in 2008.”
Despite his initial pessimism, after a few days of negotiation Senate Majority Leader Harry Reid (NV) stated, “I’m very optimistic that we will reach an agreement… to reopen the government, pay the nation’s bills and begin long-term negotiations to put our country on sound fiscal footing.”
What are Republicans saying?
Speaker John Boehner (OH) recently distanced himself from voices on the far right saying, “The idea of default is wrong, and we shouldn’t get anywhere close to it.”
Sen. Ted Cruz (TX), the Tea Party leader who led the charge for the government shutdown, said on CNN, “The debt ceiling historically has been among the best leverage that Congress has to rein in the executive.”
The general consensus from other Tea Party members is that there will be no adverse effects to hitting the debt ceiling. In fact, Rep. Ted Yoho (FL) said on October 4, “I think, it would bring stability to the world markets” (The Washington Post).
Has this fight happened before?
Yes. In July of 2011, Republicans and President Obama fought about raising the debt ceiling. The debt ceiling was not breached that time, but the United States’ credit rating2 was downgraded for the first time in our nation’s history, causing huge stock sell-offs in major markets all over the world. Congress has raised, extended or redefined the debt ceiling 78 times since 1960.
Why should I care?
If the debt ceiling isn’t raised, it will be more expensive for Americans to borrow money. Interest rates for credit cards could go up, mortgage rates could increase, and government checks (Social Security, food stamps, military benefits) might not get sent out.
Useful Vocab
1) Power of the Purse– the ability to tax and spend public money for the national interest
2) Credit Rating– a measure of a debtor’s ability to make payments on time