The stalemate is about to get more complex. The reason: Congress has a second deadline to deal with. Here’s what you need to know about the debt limit:
Q What is the debt ceiling?
A Congress for the first time passed a law to limit how much debt the government could have during World War I. That limit has been raised many times since and now stands at $16.7 trillion.
Q Why does the limit need to be raised?
A Whenever the government has to borrow, the debt grows. The debt hit the current limit in May. Since then, the government has used various accounting measures to conserve cash, but the extension those techniques provided will only last a little while longer. Congress either has to raise the limit or the nation will no longer be able to pay all its bills.
Q What’s the deadline?
A Treasury Secretary Jack Lew has told Congress that the current “extraordinary measures” will provide enough cash only until Oct. 17.
Q Would the government be unable to pay bills immediately?
A The government will have income from tax revenues — about $30 billion each day. Over time, however, that income will cover only about two-thirds of the bills that come due. A nonpartisan outside group, the Bipartisan Policy Center, estimates that the date would fall between Oct. 18 and Nov. 5.
Q What would happen if the government couldn’t pay its bills?
A No one really knows because Congress has never refused to raise the debt ceiling. But economists and business leaders warn that any hint of a U.S. default on its obligations could rattle financial markets and, perhaps, trigger another financial crisis.
Q Could the government pay some bills but not others?
A Government lawyers say they lack legal authority to pick and choose. Moreover, decisions to pay bondholders but delay Social Security checks, or to pay for Medicare but not military supplies would be politically almost impossible. Instead, what the Treasury has considered doing is paying as many bills as possible and postponing some payments.
Q Given the risks, why is raising the debt ceiling difficult?
A Some members of Congress disapprove of debt on principle and therefore always vote against increasing the limit. Others know that a vote for “more debt” makes an easy 30-second negative campaign ad even though the increase is needed to pay bills the government already has incurred. Still others want to use the occasion as an opportunity to push for concessions on other issues. Thus, the history of debt-limit votes shows that getting to yes has often proved difficult.
Q What happened the last time this came up?
A Congress deadlocked over the debt in July 2011. Amid warnings that a first-ever default by the government could plunge the economy back into recession, they reached a last-minute deal that included spending cuts and a procedure under which Congress allowed President Obama to raise the debt ceiling on his own. Each chamber could then vote to reject the increase, but unless both houses overrode a presidential veto, the increase would stick. That way, members of Congress could go on record as having been opposed to the debt. When that deal expired, Congress this spring passed a bill that suspended the debt ceiling for a while so that members would not have to vote to increase it.
Q If members of Congress hate to vote on the debt ceiling, why don’t they just get rid of it?
A One of the things members of Congress hate even more than voting on the debt ceiling is giving up power. And the periodic need to raise the debt ceiling gives them potential power over the executive branch.
Tribune Washington Bureau