The sentiment that “everything will be fine in a few days” is wearing thin. As the deadline for raising the debt ceiling is coming closer (October 17th is the latest deadline) and every big media source is squawking that “THE GOVERNMENT IS SHUTTING DOWN”, there seems to be no sign of a compromise or even a back down from one party. The ripples of fear and caution have already started.
If you are like me and are confused about what is happening, basically the Republican party is holding the debt ceiling hostage in order to get the Obama administration to make substantial concessions to fulfill their agenda. Their hope is to have Obama concede as he did in 2011. But here are what the Republicans are asking for this time:
2. What Will Happen
If Republicans continue to hold the debt ceiling hostage, it would not affect “mandatory” spending on services and operations that are deemed necessary for the safety of human life and national security. That means programs like Medicaid, Medicare, Social Security, unemployment insurance, food stamps, tax credits and some other programs are all safe and will keep on working. However, if the program is deemed unnecessary, the spending for those programs would cease. Close to a million federal workers performing those tasks (tasks deemed “non-essential to national safety or human life”) could be furloughed, leading to huge delays or shutdowns in services such as: the Armed Forces (soldiers at home or abroad won’t receive paychecks), Health Care, Public Safety, Disaster Relief (Sorry, Colorado), and more.
If you want to read more about the repercussions of a government shut down check out:
- Think Progress’ article about what will happen if the government shuts down
- And Annie Lowrey’s article on what the difference is between a Shutdown and a Default and the relative impact of both
3. Who’s Worried
- “Treasury Secretary Jack Lew now estimates that he will have less cash on hand to pay the country's bills in mid-October, going down from $50 billion to $30 billion. […] What that means is that by mid-October, if Congress hasn't raised the borrowing limit, Treasury will only be able to pay the bills that come in with the cash it has on hand plus whatever revenue comes in. If the borrowing limit is not raised the Treasury may exhaust its cash balance and therefore no longer be able to pay all the country's bills in full and on time sometime in late October.” Uh oh.
- Not surprisingly, “eight in 10 Americans find it unacceptable for either President Obama or members of Congress to threaten to shut down the government during budget negotiations in order to achieve their goals, according to the latest New York Times/CBS News poll.”
- For others (economists, economic columnists, and political scientists), they see a long, dragged out fight costing almost 2 billion dollars in losses to our economy. And if the debt ceiling is breached it could cost us hundreds of billions more, all because there was no compromise or middle ground found.
4. My Greatest Hope
After reading a ton of pessimistic, doomsday-like articles and op-eds about the situation, I am going to take an optimistic approach to Jonathan Chait’s article about Why Obama Can’t Pay a Debt-Ceiling Ransom This Time.
Chait talks about how, “Since Ronald Reagan’s inauguration, Congress has lifted the debt ceiling 45 times. Only a handful of those debt-ceiling hikes included any changes to budget policy. The historic rule has always been that, when the debt ceiling needs to be raised, Congress raises it without extracting concessions in return. If the two parties happen to be negotiating budget policy, they do it on a separate track and append the debt-ceiling increase to the final vote.” He goes on to say that in 2011 the Republicans got away with making threats leading the Obama administration to make concessions. But if Obama were to concede again, it would drastically change “the constitutional structure of this government” and solidify this type of tactic as a new power for Congress to use whenever it wants something.
My greatest hope is that Obama will keep to his word about not negotiating the debt ceiling and will maintain the integrity of the constitutional structure of our government; and that the Democrats take a stand and break the bad habits of the Republican party. Republicans should not toy with the stability of our country and the lives of millions of people.
5. More Reading
Sources for everything to do with the Government Shutdown:
- Debt Ceiling crunch no later than Oct. 17
- A debt-celing ransom note takes shape
- Wonkbook: Brace yourselves. This fiscal fight could be worse than 2011‘s
- How much would a government shutdown cost in lost economic growth?
- Start the clock on the 2013 debt-ceiling crisis
- Shutdown: Here is what will happen if Congress doesn’t get its act together by Monday
- US Congress turns attention to debt limit battle
- Why Obama can’t pay a debt-ceiling ransom this time
- Shutdown vs. Default: The Relative Impact