We’re in week two of the government shutdown and 800,000 employees are still furloughed, head start has been slashed, national parks are still closed and John Boehner is still being a dick.
But if you thought things couldn’t get worse than they already are…think again.
The latest disaster on the horizon is called the debt ceiling. And if legislation isn’t passed before October 17 to raise it, some bad things could happen. I mean like hide-your-money-under-your-mattress bad. The shitty economy will be even shittier. And yes, we have our trusty Congress to thank.
But now that we know of the terrible, horrible, no good, very bad thing that could happen if Congress doesn’t act, you’re probably wondering what a debt ceiling even is.
So here’s the deal…
What is the debt ceiling?
In the simplest terms, the debt ceiling is the total amount of money the U.S. government can borrow to pay its obligations. We exceeded that limit in May, but the Treasury Department has since used various measures to continue borrowing.
Congressional Republicans have already blocked a spending law that led us into the shutdown, but now they might refuse to raise the federal debt ceiling (currently set at $16.7 trillion). Without permission to borrow more, the government can’t pay its bills. So basically, if the current debt ceiling stays in place, the Treasure will run short of cash.
Why would this be bad?
Take it from this guy. He’s an expert…
“The potential is disastrous,” said Gus Faucher, senior economist with PNC Financial Services Group. “We would see interest rates spike across the board. We’d see a huge crash in the dollar. People count on lending their money to the federal government and getting it back, and if that trust is taken away — it’s never happened that we haven’t met our obligations as a nation — then that has very, very negative consequences for the U.S. economy.”
Oh, did I mention this could send us reeling back into a nasty recession that experts say will be worse than the Great Depression.
What else will refusing to raise the debt ceiling do?
So aside from those terrible, horrible, no good, very bad things, there’s a host of problems we may run into.
– Retirees might not get their Social Security, medicare or medicaid checks
– Global markets will see that we’re messing up big time…which might stop global credit flows
– The U.S. would have trouble paying interest on its debt (including a $6 billion payout due at the end of October)
– U.S. will default on its obligations and the value of the dollar will decline
– Stock markets will plunge
– Interest rates for loans like mortgages and credit cards, car student would become more costly
And in the end, everybody hurts.
Why are Republican’s willing to hurt the nation?
Well, it’s simple. Many don’t believe the hype and others won’t budge until Obama becomes a full-fledged Republican himself.
Despite these warning signs, Republican lawmakers insist a debt ceiling breach would be no big deal. Rep. John Fleming (R-LA) thinks Congress shouldn’t listen to economists because “many times they’re wrong.” Rep. Steve King (R-IA) remains certain that nothing bad will come of blowing past the October 17 deadline. Rep. Ted Yoho (R-FL) even thinks that financial markets would actuallystabilize on news of a U.S. default. For his part, Speaker John Boehner (R-OH) acknowledges that default would indeed happen and be very bad, but says theonly way to avoid it is for President Obama to adopt the Republican position on every major policy dispute of the past few years.
And we doubt that’s going to happen. Hope our government has a plan B because “it’s about to go down.”
SOURCE: Bloomberg, CBS, Think Progress | PHOTO CREDIT: Getty
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