Dual crises: Shutdown, debt limit could merge

A look at what you need to know about the two fiscal matters
Associated Press
Oct 13, 2013

Democrats and Republicans regularly warn about the dire consequences of legislation they don't like. Often it's gloom-and-doom partisan hype.

This time, though, people already are feeling the fallout as twin tempests — the partial government shutdown and a potential default on the country's debts — threaten to form a single economic-policy superstorm.

The shutdown began Oct. 1 because a divided Congress couldn't agree on a budget. Thousands of federal workers are furloughed, national parks are closed and many nonessential governmental services are dialed back or put on hold.

The shutdown doesn't directly threaten Social Security, other mandatory benefits or U.S. interest payments on the national debt.

Breaching the debt limit would.

Unless Congress raises that limit soon, the government will run out of the authority to borrow and pay its bills on Thursday, the Treasury Department says.

A default would challenge the U.S. dollar's status as the world's "reserve" currency. More than 60 percent of all foreign country reserves are in U.S. dollars, the prime currency in international trade.

"Without enough money to pay its bills, any of its payments are at risk — including all government spending, mandatory payments, interest on our debts, and payments to U.S. bondholders," the bipartisan Committee for a Responsible Federal Budget said in a recent report.

A look at what you need to know about the two fiscal matters:

The debt ceiling is the legal limit to all federal borrowing, an absolute ceiling on the national debt that cannot be breached.

It can be raised.

Since Congress first established a limit in 1917, it has been raised roughly 100 times. Raising the statutory limit does not authorize borrowing for new spending. It only allows the government to keep borrowing to pay existing bills.

The government borrows money mostly by selling Treasury bills, notes and other securities, including U.S. savings bonds. Individuals, mutual funds, corporations and governments worldwide buy the bonds.

Paying interest on these bonds is one of the government's largest single expenses.

In the budget year that ended Sept. 30, the government made $396 billion in interest payments, including payments on bonds held in some government accounts such as the Social Security Trust Fund.

The national debt is the accumulation of annual budget deficits. It first crossed the $1 trillion mark early in the administration of President Ronald Reagan.

It stood at $10.6 trillion when President Barack Obama took office in January 2009 and is $16.7 trillion today — bumping up against the debt limit, which is also $16.7 trillion rounded off.

Recently, the Treasury Department has used complicated accounting maneuvers to keep from technically exceeding the limit. But it's running out of such tricks.

 

There are a couple Hail Mary plays the government could try if the deadlock persists: selling gold from U.S. reserves, selling or leasing government buildings or national parklands and minting special large-denomination coins.

The Obama administration has shown little interest in such steps.

One possibility was suggested in 2011 by former President Bill Clinton and more recently by House Democratic leader Nancy Pelosi of California: have Obama raise the ceiling on his own, citing the part of the 14th Amendment that says "the validity of the public debt of the United States, authorized by law ... shall not be questioned."

Obama was asked at a Twitter town hall forum in July whether he would use that amendment as the basis to raise the debt ceiling. "I don't think we should get to the constitutional issue," he tweeted. "Congress has a responsibility to make sure we pay our bills. We've always paid them in the past."

His spokesman Jay Carney has said the administration doesn't believe the amendment gives the president the authority to ignore the debt ceiling.

 

While budget deficits are coming down, the government continues to add to the national debt.

The deficit represents the annual difference between the government's spending and the tax revenues it takes in. Each deficit contributes to the national debt. The last time the government ran an annual surplus was in 2001.

The annual deficit declined to roughly $642 billion for the just-ended budget year, the first time in five years it has dropped below $1 trillion. It was $1.4 trillion when Obama took office in 2009.

Still, the government must borrow 19 cents for every dollar it spends, pushing up the nation's overall debt level.

One reason that keeps increasing: the army of retiring baby boomers leaving the workforce and beginning to collect Medicare and Social Security benefits.

 

Obama and Democratic leaders denounce as a form of blackmail GOP efforts to use the shutdown and debt limit debate to delay or defund Obama's health care law.

Efforts by opposition parties to try to put strings on a president's debt-limit increases have been pretty standard going back at least to President Dwight D. Eisenhower in the 1950s.

"Congress consistently brings the government to the edge of default before facing its responsibility. This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veterans' benefits," Reagan said in a 1987 radio address. He was scolding the Democratic-controlled Congress for seeking to modify or defeat his proposal to raise the debt limit.

He raised the debt ceiling 18 times.

As a senator representing Illinois, Obama voted against President George W. Bush's 2006 increase in the debt limit, calling it a "leadership failure" and "sign that the U.S. government can't pay its own bills."

Bush won that battle.

 

Comments

mikesee

Coasterfanned, I read this and just thought wow.

You say that Bush: "while CUTTING taxes (incoming revenue), which would have helped pay for the above stupidity" Is this anything like Pres Obama cutting the amount of taxes that one had to pay into social security for the years 2011 and 2012? Is SS that financially stable that we could afford that to happen? I think not!

You also say: "Going out the next day and buying a swimming pool, Hawaii vacation and new car...using your credit card" This is exactly what Pres Obama has been doing the last 5 years with this country! He has continued to saddle our future generations with massive amounts of debt. He has not really cut anything anywhere! It has been done with smoke and mirrors. It only appears that steps have been taken on reductions but in reality there has been an increase in tax revenues which has held down the actual amount in the bottom dollar.

The Dems should be the last ones to try and teach someone about fiscal responsiblity!

The Big Dog's back

Why is it every time the CONServatives tank the economy, Hoover, Bush2, they expect the Dems to clean up their mess in record time? If the CONS have all the solutions why do they tank the economy in the 1st place?

santown419

+1

The Hero Zone's picture
The Hero Zone

The Tea Party came about BECAUSE of the tanking that happened in the twilight of President Bush's presidency and the dawning of President Obama's which looked to be more of the same. Conservatives do have many ideas on how to repair the economy and fix our political system, however, establishment Republicans and any Democrats not willing to entertain any blend of conservatism constantly try to put them down or punish them for winning elections against their GOBs.

As a millennial (maybe Gen-X) I see this as the modern cultural revolution of the '60s. A group of people who are fed up with the ruling elite, which INCLUDES REPUBLICANS mind you, are making a decentralized, grassroots effort to try and stop the bleeding that both parties have caused.

Look at those with whom you seem to disagree most: Contango, SamAdams, grumpy, and others. Heck, even me (you even called me a name, albeit a lame one)! Have any of them held a steadfast vigil over the Bush legacy vowing to defend it from any and all attack for all their days until their dying breath? From what I read they are just as upset over the economy he helmed as you are! They are just as sick of Republicans as you are! But, they are at least putting in research or making articulate (generally, Contango can be kind of snippy), supported posts and not blindly cheerleading a party, pretending like it is the best thing and the only party worth joining.

You should be embracing Tea Partiers (at least on economic issues, some traditionally Republican social issues disagree with me and others above) because they are a rebel faction looking to tear down and replace the Republicans. Oh I wish for the day the Democrats have a wakeup and have independent thought from within to shake off the GOBs there too! Complacency breeds weakness, cronies, and stifled intuitive thought.

Why can't we have someone today who can give a speech like this?! I'll take a Democrat in an instant if s/he could actually convey thoughts and invoke inspiration like this!

http://youtu.be/qXBswFfh6AY

Where are they?

Do you hate anyone who isn't a Democrat (no matter on how many other issues they may agree with you) so much that you will only listen to anyone with a D after their name? There are very few people here of a liberal mindset who seem to actually be able to articulate their beliefs and that is SO FRUSTRATING! On that note coasterfan while I may disagree with you on some things I applaud the fact you actually try to do more than give a two-sentence insult to defend your beliefs or convince people of your thoughts. You have passion Big Dog, that is clear, but why can't I get an explanation of why you believe what you believe?

You and others have an audience here whether they like you or not. You are in/famous on these forums. Why not use it to actually articulate a point? To open yourself to the possibility that not everything Democrats do is golden? To ask questions, explore, and try to understand?

I, for one, wish we had a communicator again.

grumpy

Can I give you a cookie? or better yet a 1/2 pan of home made brownies.. with walnuts and butterscotch chips that my wife make when I have been an especially good boy? They are worth the price of cleaning the garage, her car and changing the grandbaby's crappy diaper for. I would give up half a pan for the price of reading this and a proper response. (I really need the other half a pan.)... I might even consider pouring you a shot of my Pappy Van Wrinkle... maybe...

The Hero Zone's picture
The Hero Zone

I'll take you up on the brownie offer, thanks! As for the shot, guess I'll have to earn it without a shadow of a doubt so you won't hesitate giving up a finger or two of it.

On a serious note though my above isn't even just a "rant" or vent. It's so frustrating sometimes. Hardly anyone in leadership wants to sit down and explain things. It is always threats, sound bites, and bumper stickers. "Government default" sounds serious! But, when you learn what it actually means, the president would have to go out of his way to purposefully and actually default the country, an act that he will never take. Does anyone ever listen to the little mays, possibles, or little words they throw in to deliver a point but not be able to be held accountable?

My biggest eye-roller was the add-on when talking about jobs. It was always "We CREATED (or saved) x jobs by Y Policy!" Doesn't anyone actually listen to what these people say? Not "hear" them, but actually listen and apply meaning to words? Why in budget talks is cutting waste/fraud/abuse some bookkeeping tactic or negotiating point when it should be done automatically?!

This sums up what we hear out of the White House and Congress nearly daily. Saying absolutely nothing with as many words as possible:

http://www.theonion.com/video/pr...

Contango

Re: "little words they throw in to deliver a point but not be able to be held accountable?"

i.e. plausible deniability & obfuscation.

"It depends upon what the meaning of the word 'is,' is." - Pres. Clinton

http://www.youtube.com/watch?v=j...

"The men the American people admire most extravagantly are the most daring liars;"

- H.L. Mencken

http://quotes.dictionary.com/The...

The Big Dog's back

You really need to educate yourself on who and what started the teatards.

Kottage Kat

Hero Zone
A huge thumbs up
Well said and spot on
Thank you for being the voice of reason we need to hear.
No snide remarks or smarmy innuendoes perhaps others will follow your example. And a sensible discussion can be had
KAT

Stop It

+1

Darwin's choice

Hero Zone...
Great Post!

Huron_1969

Great post HZ !!!
Thank you for putting into words what many of us are thinking but never expressed

Dr. Information

We can all agree that Bush holds blame as well, however the liberals (clear to see) just want to excuse Obama even 5 years later. The man is no president. More like a celebrity wannabe.

arnmcrmn

Why you people even respond to coasterfan, and big dog just amazes me. If you want real talk and real discussion, just pass them by.

mikesee

In 2010 Pres Obama under the guidance of Pelosi, Reid, Clinton, Kerry and even many blogging dems on here felt that the health insurance companies were big bad and evil. The above mentioned felt something had to be done. Hence we now have Obamacare. Many of the above mentioned feel it is a great way for the middle class to save on their health insurance premiums as well as provide coverage for the poor.

Fast forward to today. The health insurance companies are laughing their a$$es off at the above mentioned fools!! Out of roughly 24 people that I have talked with not one of them have said their health insureance premiums will be going down due to Obamacare. Quite the contrary. Yes, their "out of pocket" premiums will go down but is only subsidized by the gov't. So, in the long run the health insurance companies will be making MORE money and we all know that sooner or later the bell will toll for the taxpayers and we will be forced through taxes to pay more to help the gov't get past this fiasco.

I wonder how the SCOTUS would have ruled had they known all of the hidden lies in this tax?

The Big Dog's back

They're taking on an additional 35 million people, no denial for pre conditions, unlimited coverage. You teatards should be all for this. But then again, that's why you're teatards.

Darwin's choice

Big Dog, can you get an insurance policy on your house when its on fire? Or, for your car after its in the ditch? And lastly, you skinflint, who's paying for all these "bargains"??

mikesee

My point here dog is that the big bad insurance are actually making more money with Obamacare. Because the gov't is subsidizing a majority of this many people don't realize that it WILL catch us, probably sooner than later.

Fools I say!

Darwin's choice

Obama shows his true colors during the "shutdown".....

http://www.youtube.com/watch?v=8...

Obama/fail

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