![]() In the absence of sufficient revenue, a failure to raise the debt ceiling would result in the administration being unable to fund all the spending which it is required to do by prior acts of Congress. Congress also usually votes on increasing the debt limit after fiscal policy decisions affecting federal borrowing have begun to take effect. The debt limit does not restrict Congress's ability to enact spending and revenue legislation that affects the level of debt or otherwise constrains fiscal policy it restricts Treasury's authority to borrow to finance the decisions already enacted by Congress and the President. Congress has set a debt ceiling, beyond which the Treasury cannot borrow (this is similar to a credit limit on a credit card). These funds can come either from tax receipts or from borrowing by the United States Department of the Treasury. Under US law, an administration can spend only if it has sufficient funds to pay for it. The Bipartisan Policy Center extended the GAO's estimates and found that delays in raising the debt ceiling would raise borrowing costs by $18.9 billion. The Government Accountability Office (GAO) estimated that the delay in raising the debt ceiling increased government borrowing costs by $1.3 billion in 2011 and also pointed to unestimated higher costs in later years. Later that week, the credit-rating agency Standard & Poor's downgraded the credit rating of the United States government for the first time in the country's history, though the other two major credit-rating agencies, Moody's and Fitch, retained America's credit rating at AAA. Prices of government bonds ("Treasuries") rose as investors, anxious over the dismal prospects of the US economic future and the ongoing European sovereign-debt crisis, fled into the still-perceived relative safety of US government bonds. The crisis sparked the most volatile week for financial markets since the 2008 crisis, with the stock market trending significantly downward. ![]() The crisis did not permanently resolve the potential of future use of the debt ceiling in budgetary disputes, as shown by the subsequent crisis in 2013. On July 31, two days prior to when the Treasury estimated the borrowing authority of the United States would be exhausted, Republicans agreed to raise the debt ceiling in exchange for a complex deal of significant future spending cuts. Both situations would likely have led to a significant international financial crisis. ![]() If the United States breached its debt ceiling and were unable to resort to other "extraordinary measures", the Treasury would have to either default on payments to bondholders or immediately curtail payment of funds owed to various companies and individuals that had been mandated but not fully funded by Congress. Some use the analogy of an individual "paying their bills." This reflects the fact that the debt ceiling does not prescribe the amount of spending, but only ensures that the government can pay for the spending to which it has already committed itself. The debt ceiling had routinely been raised in the past without partisan debate or additional terms or conditions. The Republican Party, which gained control of the House of Representatives in January of 2011, demanded that President Obama negotiate over deficit reduction in exchange for an increase in the debt ceiling, the statutory maximum of money the Treasury is allowed to borrow. The crisis led to the passage of the Budget Control Act of 2011. The ongoing political debate in the United States Congress about the appropriate level of government spending and its effect on the national debt and deficit reached a crisis in 2011 that was centered on raising the debt ceiling.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |