The government shutdown is making headlines, but an even bigger crisis looms over the nation's debt ceiling. Here's what you need to know about this complicated issue:
What is it? -- It's a cap set by Congress on how much the federal government may have in outstanding debt. The cap applies to debt owed to the public (i.e., anyone who buys U.S. bonds) plus debt owed to federal government trust funds such as those for Social Security and Medicare.
What's it currently set at? -- Congress has always set some kind of limit on national debt, but the first modern version of it was set in 1917. Today it's set at $16.699 trillion.
How often has Congress raised it? -- So often. On average, more than once a year. Since 1940, lawmakers have effectively approved 79 increases.
Will raising it again give Congress a 'license to spend more?' -- No. Raising the debt ceiling simply lets Treasury borrow the money it needs to pay all U.S. bills and other legal obligations in full and on time. It's more like a license to continue paying what the country owes.
So, why does Congress even bother with a limit? -- In theory, setting a debt ceiling is supposed to help Congress control spending. But it really doesn't. It would be much better, budget experts say, to authorize debt limit increases at the same time that Congress passes bills to raise spending or cut taxes, both of which can add to deficits.
What's holding up Congress this time? -- Many Republicans today are insisting that any increase in the debt ceiling be tied to spending cuts, a host of unrelated matters like the Keystone pipeline and, among some conservatives, the defunding and delay of Obamacare. Meanwhile, President Obama and Democrats want a "clean" increase and insist they won't negotiate.
Is this the same fight they're having over agovernment shutdown? -- No. The government shut down because Congress couldn't agree to fund the government before the fiscal year started on Tuesday.
So what happens if Congress doesn't raise it in time? -- No one knows for sure because that's never happened before. But the going assumption is that no good will come of it. The Treasury would not be allowed to borrow money, which means by sometime in late October or early November, the country will no longer be able to pay its bills.
What then? -- That's a good question with no clear answer. The Treasury may try to pay some bills and delay others, or delay all bills due on a given day until it has enough revenue in hand to pay all of them. Most experts think the Treasury would do all it could to prioritize interest payments on the debt, lest the United States default on its bonds, which would likely send markets plunging and interest rates soaring.
Economically, it could be disastrous if the standoff lasts for more than a couple of days. "Federal employees, contractors, program beneficiaries, businesses and state and local governments would find themselves suddenly short of expected cash, causing a ripple effect through the economy," Donald Marron, a former Congressional Budget Office director, told lawmakers.
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