The “deadlocked” Congress in week two of the first government shutdown in 17 years is quickly approaching its October 17 deadline to increase borrowing power or face the possibility of default.
Neither Democrats nor Republicans are displaying any signs that an agreement will come before this deadline and the decision is likely going to go down to the wire, as it was in 2011, which was the last near-crisis involving the debt ceiling issue.
It is the agenda of Republicans and Speaker John Boehner to “talk about the spending problem,” the Speaker said in a Huffington Post article, which would include reforming entitlement spending such as Social Security.
The Democrats and Harry Reid aim to pass a bill which would solely raise the borrowing capacity of the US Treasury. It’s more of a “we’ll address the serious-spending-problem-that-is-going-to-bankrupt-our-nation later” type of approach.
So the Treasury technically hit the debt ceiling in May of this year. There have been a few accounting measures taken to ensure that borrowing was all being done within that limit. What’s going to happen on October 17 if Congress does not either cut spending or raise borrowing powers for the Treasury, the Treasury will be cut off though it will likely have outstanding bills to pay. Plain and simple, if the Treasury does not have the ability to borrow, the cash and other revenue it has on hand may not be sufficient to meet certain financial obligations and the United States government risks defaulting on those obligations…a bad situation entirely.
Stay tuned over break to see where the debt ceiling debate goes. Do you think Congress will not come to an agreement and the US Treasury will risk defaulting on financial obligations?