What is the debt ceiling? Why YOU should care
Financial meltdown looms if GOP continues to block raising the limit. Global crisis predicted.
Never in history has the United States not paid its bills on time. And yet, today we are less than two weeks away from a financial catastrophe.
The Secretary of the Treasury – who pays all the country’s bills including the interest on its $28.8 Trillion national debt — warned last week that if Congress fails to raise the statutory limit on the amount the federal government can borrow before Oct. 18, it will run out of money.
The consequences will be far-reaching, immediate, and global! In countless ways, YOU and millions of others will be instantly affected. This is not something you can blithely ignore.
Even worse, this is a disaster that could be easily prevented if only there was a little bit more common sense amongst the Republican members of both the House of Representatives and the US Senate.
On Monday, President Joe Biden issued his strongest warning yet to Senate Minority Leader Mitch McConnell (R-NEVERLAND) and the entire Senate Republican caucus not to fiddle while the debt limit looms.
Speaking at the White House, the president blamed Republicans who have refused to provide their votes to help Democrats avert the debt ceiling cliff.
He called Republicans “hypocritical, dangerous and disgraceful.”
When you finish reading this article click the link at the bottom to send an email to the minority leader of the House and the minority leader of the Senate. They should be tarred and feathered!
In her Sept 30 testimony before the Committee on Financial Services, U.S. House of Representatives Secretary of the Treasury Janet L. Yellen warned about the looming apocalypse.
“It is imperative that Congress address the debt limit,” she said. “If not, our current estimate is that Treasury will likely exhaust its extraordinary measures [by which it has continued operating] by Oct. 18. At that point, we expect Treasury would be left with very limited resources that would be depleted quickly.”
Well, that is typically understated. It would be far worse than that. America would default for the first time in history.
Yellen added. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession as a result.”
Yellen reminded the lawmakers that it was them who had committed to pay the bills in the first place. The debt ceiling has been raised or suspended 78 times since 1960, almost always on a bipartisan basis, she said.
“We must address this issue to honor commitments made by this – and prior – Congresses, including those made to address the health and economic impact of the pandemic. It’s necessary to avert a catastrophic event for our economy.”
When the secretary of the treasury warns of a "catastrophic event,” she's not kidding.
In a Sept. 22 extensive explanation of the history and consequences of the debt limit, Debt Limit Q&A the widely respected site factcheck.org might have been the source for Yellen’s comments – except they took it directly from the Treasury website.
“Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents,” Treasury says on its website.
Passing debt limit increases used to be a bipartisan affair – except when the president is a Democrat and Republicans run the Senate.
“Under President Donald Trump, Congress passed three spending bills — in 2017, 2018 and 2019 — that suspended the debt limit,” FactCheck reports.
In each case, the debt limit was raised at the end of the suspension period to account for the cumulative borrowing that occurred during the suspension, as explained in an April report by the nonpartisan Congressional Research Service:
“President Joe Biden and the Democrats are now seeking to do what Trump and the Republicans did in 2017, 2018 and 2019: resolve the debt limit issue in a bipartisan manner.”
It's too bad the other party is living in an alternate reality where the United States does not have to pay its bills.
Republicans in the Senate have repeatedly voted against a debt-limit resolution, seeking to link a vote on the debt limit solely to the Democrats.
“Senate Republicans would support a clean continuing resolution that includes appropriate disaster relief and targeted Afghan assistance,” Senate Minority Leader Mitch McConnell said in a Sept. 20 floor speech. “We will not support legislation that raises the debt limit.”
The minority leader has a very short memory and indeed he was just digging himself deeper into a hole.
On the other side of the Capitol on Sept. 29 the Democratic- controlled house of representatives passed a bill to avoid a debt default, according to NPR, which also said: But It's Mostly Symbolic!
“Facing multiple deadlines, Democratic leaders in the House tried to make some headway — even if only symbolically — by passing a bill Wednesday that would suspend the nation's borrowing limit through mid-December of next year,” NPR reported.
“The measure passed 219-212, largely along party lines, but is expected to fail in the Senate.” (emphasis added)
It did fail.
Republicans from both the House and the Senate have objected to raising the debt limit while Democrats work on spending as much as $3.5 trillion on Biden's top policy proposals through a process called budget reconciliation, NPR reported.
“Republicans argue that if Democrats plan to pass that spending measure with Democratic votes alone, they can include suspending the debt limit in that package.
“Democratic leaders counter that raising the debt limit has traditionally been a bipartisan endeavor and the latest effort includes debt accrued under the Trump administration.”
They sound like kids in a schoolyard throwing taunts at one another – not like adults controlling the global economy.
What is the “debt ceiling”?
A debt limit or debt ceiling is a legislative mechanism restricting the total amount that a country can borrow or how much debt it can be permitted to take on. Several countries have debt limitation restrictions. It was first created in 1917.
The reason we are facing the current catastrophe, actually, is because of a bill passed two years ago when the Republicans controlled the US Senate.
According to the Congressional research service, on Aug. 2, 2019, the Bipartisan Budget Act of 2019, which modified discretionary spending limits, was enacted, suspending the debt limit until July 31, 2021 – just over two months ago. “Once that suspension lapses, the Treasury Secretary can employ extraordinary measures to meet federal financial obligations.” According to Janet Yellen, those extraordinary measures have now been exhausted.
If the adults were in control, they would realize there is a far better way to deal with this entire conundrum.
Just repeal the entire debt limit forever and we will never face the situation again.
Indeed that is exactly what a new law introduced earlier this year by Rep. Brandon Boyle of Pennsylvania would accomplish.
His bill, H.R. 1041: To repeal the debt ceiling was introduced on Feb 15, 2021
It has not gone anywhere.
“This bill is in the first stage of the legislative process,” according to govtrack.us “It was introduced into Congress on Feb. 15, 2021. It will typically be considered by committee next before it is possibly sent on to the House or Senate as a whole.”
Boyle has five cosponsors, all Democrats. But the bill has only a 3% chance of being enacted.
How you will be affected
So, you ask, how will it affect ME if the debt limit is hit?
Let's turn to be conservative think tank Brookings Institution for an answer.
According to Moody’s Analytics cited in the article, if the impasse lasted through November, employment would decline by 5 million and real GDP would decline almost 4 percent in the near term before recovering. That is five million Americans newly unemployed, and $880 billion shaved off the $22 trillion economy overnight. Thousands of businesses would close, there would be a run on the banks, the stock market would crash, and ATMs would run out of cash.
It's definitely not a pretty picture, but what makes it even worse is that it is totally unnecessary.
If we are lucky, Congress will go right up to the edge of the cliff and then chicken out at the last minute as they have repeatedly done in the past. But they should all be put in jail for forcing the country through such unneeded misery.
Write to the minority leaders today to get them to do the right thing. Click on the link below.
Well, Warren, again you wrote an excellent piece with many facts and a full explanation of what the “debt ceiling” is. I had no idea as my comprehension or interest of anything involving numbers or finance is nil save figuring out the amount of a tip after a meal: 10%, 15% or 20%? I do know that 1 and 1 is Two!! That’s about it!
Thank you for your incitefull and well researched commentary..
The Democrats are having conniptions because they know they will be blamed if the United States defaults and the global economy crashes. All they wanna do is spend us taxpayers hard-earned money by the trillions.
Their social engineering plans are a boondoggle of incomparable size. They will spend us into oblivion, consequences be damned.
Thank goodness the Republicans have more sense. Ever since Ronald Reagan, they have wanted smaller government and less spending. Much better for us taxpayers.