The term “debt ceiling” faded into the background of political chatter after Congress not-so-triumphantly ended the government shutdown back in October.
Now, it’s back -- but lacking its previous vengeance -- with a House vote scheduled for Tuesday night. What gives? Why are we even dealing with this again?
Here’s your quick explainer:
Why are we talking about the debt ceiling again? I thought we just dealt with this.
We did, last October. When Congress passed a bill to end the government shutdown, the measure included an agreement to avoid the United States defaulting on its debts. The deal suspended the debt limit until Feb. 7.
Wait, but Feb. 7 was last week. What happened then?
Feb. 7 was the date Congress set, but the Treasury Department can use what it calls “extraordinary measures” to ensure that the nation continues to meet its obligations for a period of time after that deadline. That basically means moving money around between different sources to buy time. But Treasury Secretary Jack Lew said last week that those measures will only last through the end of this month. By Feb. 27, he calculated, the Treasury Department will be down to about $50 billion cash on hand -- not enough to guarantee against national default.
OK, time out: Remind me what the debt ceiling is again.
While Congress has always had the ability to restrict federal debt, the current constraints stem from World War I. Needing funds to finance the military during the World War I, Congress dropped some limits on how Liberty Bonds are redeemed. That paved the way for the Treasury Department to have more and more flexibility in how to issue bonds and manage the nation’s finances. Eventually, Congress created one limit that covered almost all public debt, figuring that it didn’t want to keep approving individual attempts to raise capital. That first debt limit, way back in the Roosevelt administration, was set at $45 billion. The debt limit reset on Feb. 7 to what it was before Congress suspended it: about $17 trillion.
$17 trillion. That’s a lot of money.
It is. For $17 trillion, you could buy 10,000 Lamborghini Venemo Roadsters every single day for a year. That’s actually a terrible analogy; there’s only nine Lamborghini Venemo Roadsters in the world, for starters. But you get the idea. It’s a big number.
Great. Thanks. So, what happens next? Are we in danger of another government shutdown?
Nope! The good news is that Congress passed a budget agreement that actually keeps the government funded all the way until September of this year, so there isn’t an immediate threat of another shutdown. Last year’s shutdown happened because Congress didn’t green light the spending to keep government operations going. The debt limit is different -- it refers to the total amount of money that the U.S. government is allowed to borrow to meet all its existing financial obligations.
But we could still default on our debt, right?
Theoretically, yes. But Congress appears to be moving pretty fast to raise the debt ceiling. After the shutdown debacle, neither party’s leaders is interested in playing chicken on this and potentially being blamed for hurting the economy. Compared to last year, you’re hearing a lot less of the argument that default wouldn’t really be that bad. Additionally, Republicans would rather focus on the unpopular Obamacare law before midterm elections later this year.
That sounds pretty painless. Way to go, Congress?
Well, don’t get too excited. There’s still major partisan angst about this, mostly because Republicans wanted to get some kind of political benefit in exchange for agreeing to raise the debt ceiling. They contemplated trying to attach the repeal of part of the Obamacare law or approval of the Keystone XL pipeline to the must-pass legislation. Those plans were abandoned, without sufficient votes to pass them. Then, Republicans considered a plan to attach the restoration of cost-of-living increases for the pensions of some veterans. Conservative Republicans didn’t like that plan, saying that they were giving up negotiating power too easily.
So what’s the latest?
Now, Republican House Speaker John Boehner says he will put a “clean” debt ceiling hike on the floor. That will incense conservative Republicans who wanted to extract at least some concessions, but Boehner says he will deliver enough GOP votes to pass it, as long as Democratic votes carry it over the finish line. That’s not necessarily a done deal; Boehner will have to find at least 17 Republicans willing to vote with Democrats.
How long until the next time we do this all over again?
Good question! The extension GOP leaders are proposing would go through March 2015, long past the November midterm elections.
The term “debt ceiling” faded into the background of political chatter after Congress not-so-triumphantly ended the government shutdown back in October.