Congress has no choice but to raise the debt ceiling

Things would get ugly in a very short time. The US economy would grind to a halt. Financial markets would be disrupted. The world would think we'd gone mad.

By Charley Blaine Jan 9, 2013 9:19AM
© Steve Allen/Brand X/Getty ImagesThe scramble is on until, say, mid-February, when failure to extend the nation's debt ceiling will result in the government running out of cash.

The government actually hit the debt ceiling on Dec. 31, but the Treasury Department has been in the process of exercising "extraordinary measures," including borrowing upwards of $200 billion, to keep the military and all the non-agencies at work.

Without a deal by Feb. 15, the government may face a shutdown that would force truly difficult decisions. Like whose bills to the government would get paid. Whose salaries would get postponed.

And there is a chance that the United States government would default on its debt, something that's never happened. Though it's come close.

The mid-February deadline isn't etched in stone. It's an estimate, made by the Bipartisan Policy Center, of when the government would literally run out of cash. The think tank calls the date "the X date."

When precisely the X date would occur is still a guess. But we're talking days around Feb. 15. At the very least there would be annoyance. Here's what we mean: The Internal Revenue Service said Tuesday that the drawn-out talks to get a tax deal done is forcing the IRS to delay processing of tax returns until Jan. 31.

The reason, according to USA Today's John Waggoner: "Programming IRS computers and printing forms and instructions were delayed by congressional wrangling over the fiscal cliff -- a combination of tax hikes and spending cuts that briefly became law on Jan. 1."

At worst, once the X date is reached, pandemonium would reign.

It's likely the financial markets would tumble badly. (Right now, however, the markets are assuming stress but not disaster.)

In a working paper, the policy center posits that the government could opt to pay some bills but not others. Or it could wait until it has enough cash to pay a day's bills.

The Bipartisan Policy Center is a think tank founded by former Senators Bob Dole, George Mitchell, Howard Baker and Tom Daschle.

 

So, let's say the government runs into a cash crisis on or about Feb. 15. Over the next month, it will probably take in roughly $270 billion and spend about $450 billion, the policy center says. If the debt ceiling is not raised and the government can't borrow the cash, the Treasury has to decide how bills will get paid. 

If the government decided to pay some bills and not others, the policy center offers this scenario.

If you pay a month's worth of:

  • Interest on Treasury securities -- $38.1 billion
  • Income tax refunds to individuals -- $85.5 billion
  • Medicare/Medicaid -- $72.5 billion
  • Social Security benefits -- $61.1 billion
  • Military pay and retirement -- $13.2 billion
  • Unemployment insurance benefits -- $6.1 billion
That's a total of $276.5 billion.

The government would have to forgo payments to:
  • Defense vendors -- $28.8 billion
  • Veterans benefits -- $4.2 billion
  • Federal salaries and benefits $19.9 billion
  • Department of Education costs (Pell grants, special education payments and the like) -- $16.8 billion
  • Food/nutrition and temporary assistance to needy families -- $10.1 billion
  • Civil Service retirement -- $5 billion
  • Health and human services grants -- $8 billion
  • Supplemental Security Income -- $3.4 billion
  • Other spending -- $79 billion. This would include expenses incurred by the Department of Justice and the FBI; the Department of Energy; the Federal Highway Administration; the Federal Aviation Administration; the Environment Protection Agency and FEMA and the national flood insurance program.

There's another scenario the policy center offered. The government doesn't pay out income tax refunds.

The government pays:

  • Interest on Treasury securities -- $38.1 billion
  • Medicare/Medicaid -- $72.5 billion
  • Social Security benefits -- $61.1 billion
  • Military pay and retirement -- $13.2 billion
  • Veterans benefits -- $4.2 billion
  • Defense vendor payments -- $28.8 billion
  • Federal salaries and benefits -- $19.9 billion
  • Unemployment insurance benefits -- $6.2 billion
  • Civil servce retirement -- $5.0 billion
  • Food and nutrition and temporary assistance to needy families -- $10.1 billion
  • Department of Education (Pell grants, Special Education) -- $16.8 billion

The government forgoes payments on:

  • Income tax refunds to individuals -- $85.5 billion
  • Health and human services grants -- $8 billion
  • Supplemental Security Income -- $3.4 billion
  • Other spending -- $79 billion. Again, these would include expenses incurred by the Department of Justice and the FBI; the Department of Energy; the Federal Highway Administration; the Federal Aviation Administration; the Environment Protection Agency and FEMA and the national flood insurance program.

And that's potentially just the first month of the crisis. No matter how you look at it, it's not a pretty picture.

The consequences, the policy center says, effectively mean an immediate 39% cut in federal spending. It means handling all payments for important and popular programs, including national defense, Medicare, Medicaid and Social Security, becomes impossible.


The economic disruption is huge and accompanied by wild uncertainty.

"Everything else is informed speculation," as Derek Thompson wrote on the Atlantic.com on Tuesday, "but you don't need a creative mind to guess that a stock market that loathes surprises would positively freak at the first-ever default of the United States government."

 

In an earlier version of the post, the scenarios above were described as occuring in the course of a day's government spending. The post should have said the scenarios were set up using a month's spending. The post now includes what the government would expect to receive and spend if the debt ceiling were simply lifted.

 

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295Comments
Jan 9, 2013 3:44PM
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Many other countries have also run into the same types of problems the US is now running into. (Greece, Italy, Portugal, Spain, Ireland, and many third world countries, for example Argentina). Eventually they were only able to borrow at very high interest rates and finally not at all. This is when some countries started printing money, (or as the US media says, "raised the debt ceiling" and "quantitative easing"). Ask Greece or any of these countries how it's working out for them. They all thought they could do it and they knew what they were doing, just as the US does now. In Greece less than 25% of the people are working (and supporting the other 75%). As their society crumbles there is rampant tax evasion and sheltering of money among the 25% of the country who are actually working and supporting the other 75%. The last thing the goverment wants to do is drive some of the few people who are actually being productive (the 25%) out of the country or put them in jail. The politicians and media and people of Greece never thought it could happen to them, and neither do the politicians and media and people of the US think it will happen to them. What makes the US think it can continue to follow a pattern that has lead other countries to ruin?
Jan 9, 2013 3:43PM
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It doesn't help that the best they came up with for the fiscal cliff was to stop some automatic increases to bad programs saving something like 14 billion dollars.  Yet they increased the amount of revenue coming in from taxes to the goverment by 41 times that amount.  How fast will that money burn a hole in their pocket on spending instead of paying down the debt.  Eventually we are in for a big hurt in terms of hyper-inflation, or a big recession.  It isn't hard to solve the problem using simple math, but politicians don't have the guts to put their voters into some pain now vs. delaying it to be a lot of pain later.
Jan 9, 2013 3:42PM
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Maybe we need to completely GET RID OF CONGRESS AND THE CORRUPTION...... Starting with NBC and the LIBERAL MEDIA.........

 

   Bigger question  - WHO IS  THE REAL OBAMA DADDY, and Obama’s real Birth Certificate, the version which is  On-Line at WhiteHouse.gov was a fake, it’s  edited and modified.

 

Bigger question  - WHO IS  THE REAL OBAMA DADDY?????   A Socialist??

http:\\www.obamasrealfather.com\           - to see site change \  to /

What happened to Obama’s  OPEN AND TRANSPARENT – it’s now  Hidden and Faked..

     Like HOPE AND CHANGE   turned to Bait and Switch and now its Dirty Politics as USUAL…

           The US Citizens should be HOPING for a CHANGE in 2012, Obama has done NOTHING in 4 years…

 for the Average US Taxpayer except  screw US all with Obama-Care which is really a TAX.

Fuel is UP from $ 1.62 in 2008  to  yesterday at $ 3.91

,  Taxes are UP, Hidden Taxes are UP,   Inflation is 11% since 2008, 

                 Oil & Electric  up  241% with no investigation,

 NEW TAX called ObamaCare (Taxation without Representation – that was bait & switch) 

 

Poverty Line from 2008 at $ 21,200  to  $ 23,744 in 2012,

 Average income down from $ 51,200 in 2008     to 43,500 in 2012….

Exactly WHAT has Obama done for Me???? 

 Lowered me from Middle Class  via something called   “Trickle UP Poverty….

Jan 9, 2013 3:41PM
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When your HOUSE is filling up with crap, you don't wait until it is almost to the ceiling and then RAISE the ceiling....you CLEAN OUT the crap!  CUT SPENDING, reduce the deficit and eliminate the waste....only then will the CRAP subside!  Also....why didn't the writer show the option of FREEZING ALL POLITICIANS pay until they fix our country's economic issues???!!!!!
Jan 9, 2013 3:41PM
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Charlie apparently you are in that crowd that likes to owe your soul to someone,These fuzzy mathamaticians are of the opinion were loosing money everyday if it wasn't for the volume we can't stay in business.DUMMKOFFS.
Jan 9, 2013 3:40PM
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In my imperfect understanding, lowering the credit rating would add billions to the debt simply by raising the interest rates on outstanding loans the US already has. No thanks. The back and forth CONGRESS indulged in the LAST time caused our credit rating to be lowered, by the words of the S & P.

Debt ceiling refers to paying for money(loans) that CONGRESS has ALREADY SPENT. Not to pay for future purchases. They had a good time with the cash and now count on the gullibility of the average voter to make the debt ceiling into something they could "negotiate" over.  As some have said, WE don't get to negotiate OUR debts, they get paid one way or another.

One can always hope that the few people that abuse our safety net programs will get what is coming to them so those programs can do what they are SUPPOSED to do, give a hand to those who need a hand temporarily and then  move on. 

One does need to remember that CORPORATE WELFARE gets TWICE the revenue the regular citizen welfare programs get. Corporations and the uber wealthy have managed to reap and keep FAR more of the wealth generated in  this country  than we will ever see.

WE the people keep the factories going, roads and other infrastructure in good repair. We teach  children, fight in the military, treat illnesses, take care of the elderly, go to school, save money, spend money, and generate wealth for other people to send overseas to avoid paying a fair share of taxes.... I do not see that a fair (or a bit above fair to be really honest) wage is "redistributing" the wealth, it would be sharing the wealth. That shared revenue would get spent by ordinary people and go back into the economy. Uber wealthy just don't spend money like we do. How many yachts, private planes, super duper parties, cars, and designer clothing can they buy to keep the rest of us working to fill their orders? That won't keep a huge economy like ours busy and profitable....I have seen stats that show the upper tax brackets save (sock away) approximately 25% of their annual income. This removes it from the larger economy. Not bad for them but it shows that We the people, who can't save our money like they can, are the actual movers and shakers of the US economy. Because WE put the money back in.

That said, the business people DO have their place too. Without them we wouldn't have as much in the way of workplace opportunities. Not every person is cut out to be an entrepreneur. What entrepreneurs generally forget is that a business owner CAN start a business on their own (sometimes) but they must hire ordinary people to work in it, must have ordinary people to buy their products, must use the infrastructure of this country to get their goods to market, therefore they CAN'T live in a vacuum and survive on their own. They need WE the people as much as we need them! Neither side can have it all their own way.

 

I don't mind tightening my belt as long as I know that EVERYONE else will be doing the same.

We the people DID put those people in Washington DC to do a job. and WE the people need to kick em in the **** to get em going. THEY need to remember that they represent US first and NOT their party. Get to work!!!!! Represent!!!!!!!!!!!!!!

Jan 9, 2013 3:38PM
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Congress must address the three major causes of our debt,

#1 Tax cuts, Since the Bush tax cuts federal revenues have fallen from over 20% of GDP to a low of 14% of GDP. With a GDP of about $15 trillion, that's a annual lose of about $800 billion per year in revenues.

#2 Increased Military spending, In 2000 our Military budget was about $300 billion per year, in 2011 it was about $739 billion, an annual increase of $439 billion per year with no revenue increases to pay for it.

#3 Healthcare costs, In 2001 Federal expenditures were about $389 billion, in 2013 they're projected at about $916 billion, an annual increase of about $527 billion, with no revenue increases to pay for it.

Jan 9, 2013 3:34PM
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If you dont raise the debt limit you automatically start paying down the national debt
Jan 9, 2013 3:34PM
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Most of life's staples, gasoline, milk, cars have increased 2 to 3 times since 1980. A college education cost has increased 10 times. Anyone paying property taxes knows how often schools seek additional money through ballot measures. I suspect a lot more of the increase in Federal Spending from 1.6 Trillion in 1996 to 3.8 Trillion in 2012 has to do with the cost of maintaining public employee benefits (both union and non union) than anyone realizes.
Jan 9, 2013 3:33PM
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Yo idiots the congress are the ones that have the authority to spend not POTUS... He has the Armed Forces idiots ... What no Americans ever read the US Constitution???Try reading it ! So to all the A$$HOLES that run their mouths on POTUS spending ? Get you heads out of your A$$... OK???The USA has the most uneducated people in the WORLD... And by the posts on this board ? Its shows.. Land of the free ? Home of the STUPID.....
Jan 9, 2013 3:32PM
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We need to unelect all of congress, senate and HoR, and elect an entirely new breed of politicians. We have allowed this travesty to exist far too long but untill we the people actually change it, we have no right to complain while the same idiots are re-elected year after year.
Jan 9, 2013 3:31PM
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They will need to raise the limit every year or two until our economy collapses under the debt they continue to rack up.  I'm to the point of exhaustion listening to all these pundits telling us why we must do what they think yet not a single one is stepping up and saying this is beyond stupid, who is going to pay for all this spending?  Keep kicking the can down the road so you can leave the problem to your children... just make sure you teach them to speak Chinese.  It truly is a matter of pay me now or pay me more later.
Jan 9, 2013 3:31PM
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THE GOV. NEEDS TO STOP FUNDING JUNK AND PORK PROJECTS ALONG WITH FOREIGN AID. CUT THE SALARIES OF THE GOVERNMENT BY 50%.  BUT ALAS THEY THINK THEY CAN KEEP REACHING IN THE POCKETS OF THE FEW TAX PAYERS THAT ARE LEFT UNTIL THERE'S NOTHING LEFT, THEN WHAT? AMERICA IS BROKE, BANKRUPT.
Jan 9, 2013 3:29PM
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Instead of looking at the mandatory areas that we should not cut and areas that we actually pay a special tax too keep operating, he's a new idea. We need to start cutting supplements that are paid from the tax dollars that should be paid for on a private level. The military is a national debt that we should never cut into. The SSI benefits and Medicare are paid through a special tax called FICA. States should pay for and support their own food assistance and help for the needy from their own budgets since the programs are mostly state regulated and state run anyways. No one should get back more on individual tax refunds than they originally paid in. This is a tax code dilemma that needs to be corrected. As fo0r the refunds that are equal to or less than the amount paid by the tax payer it is their money anyways and should not be considered a debt to repay it. Unemployment insurance benefits are suppose top be covered in advance. The government should not be using tax dollars to fund a program that employers have to pay in to. It should be 100% self supporting. No extensions at our expense. FEMA is not a necessity. States should institute EMA's for their own states at a state level expense. Why should people in , say for example Iowa, have to pay for damages suffered by people in Florida or even Hawaii. This should be state level and not a federal expense. The only portion of the federal education expense that might, and only might, be necessary is PELL GRANT's. The rest is a personal and local responsibility unless it is a national run school, not state or local schools. Even public schools should be funded by local financial support even if it means increasing property taxes to pay for the school system. Private schools should be funded by tuitions and religious schools school be funded by the Church or establishment they belong to, not public tax dollars. All Medicaid, SNAP, AFDC, EBT, Welfare, and all other entitlement programs not covered under FICA should all be a state to state responsibility. The states should decide how to fund and manage these programs.

Basically to cut this long answer and description short I will say this: Our Federal Government budget should only be responsible for current government salaries (retired officials only get a 1/3 of their active salary for retirement if they have no other form of income), national defense, not even homeland security, (Only military spending),International Embassies and CIA, National law enforcement (FBI and federal judges, court house, and the Supreme court), and national rights policies. The federal government is to establish Justice, Ensure Domestic Tranquility, and  provide for the common defense of the United States of America. Read the preamble to the U.S. Constitution. Also any financial responsibility not directly delegated to the federal government under the U.S. Constitution or its Amendments shall according to the 10th Amendment of the Bill of Rights be delegated to the States.

If we could get back to the purpose of our government and redeistribute all the rest back to the states and delegated in the U.S. Constitution I feel our governemnt could lower taxes on the people and still provide for all it is responsible for. Let the states and local government do their duty and provide for the rest.

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Sure, why not, it's been done so many times in the past, why stop now.

 

Forget about trying to fix the issue, raising it is much easier and less taxing on our overpaid congressmen.

Jan 9, 2013 3:28PM
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Hum. The anwer is because our great leader has over spent.
Jan 9, 2013 3:27PM
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Give me the check book, bet I can do some cutting, our govt clowns are the biggest waste to tax payers ever

Jan 9, 2013 3:26PM
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One more thing. All of this can be stopped the next time you vote, it really is just that simple. Quit blaming everyone else when the voters are the real guilty party.
Jan 9, 2013 3:25PM
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Oh yeah! Sorry Charlie. THEY NEED TO STOP SPENDING!
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Apparently Texas inadvertently has shown us the answer. As I understand it, the state legislature in Texas BY LAW can only sit 4-5 months Max every 2 years, and can only pass a budget  once every two years. With a strict time limit like that, BOTH PARTIES have to co-operate to get things done, without the hysterics , grandstanding ,bluffing and posturing that goes on in Washington. Or maybe you need a third party. and strict term limits so we can throw the ineffectual buggers out forever.
The USA is treading VERY DANGEROUS GROUND when the amount of interest that the government pays yearly on money borrowed from the CHINESE is now enough to pay the entire Chinese defense budget.. Who do you think the new modern weapons, nuclear and conventional,that the Chinese are buying/building in large quantities are AIMED AT?????
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