So if you live in or have heard of the United States then you’ve probably heard lots of people talking about the whole debt ceiling deal, and if you’re the average internet peruser you probably have no idea what they’re talking about most of the time. Honestly, neither do I. So I’ve spent the last while skimming only the best Wikipedia articles, clicking on every relevant link on the New York Times website, and harrassing my one (1) political-science-inclined friend to get a very general idea of what all is going on – I call it The Grossly Simplified and Possibly Only Pseudo-Accurate Debt Ceiling for English Majors: A Love Story.
Background: Debt is accrued, kind of obviously, when the government spends more than its revenue. In order to keep funding public programs and paying gov’t salaries, etc., Congress basically sells debt to people, and according to somewhere in the Constitution, Congress is the only thing that can borrow money on the America’s credit. So back in the day, like founding-of-the-US-through-the-early-20th-century-day, Congress had to individually approve every time it borrowed money. During WWI, we were borrowing so much money on credit (i.e., selling debt to people and countries) that Congress decided to kind of streamline the process and just say, “eh, it’s all approved – just don’t go over . . . let’s say 11.5 billion dollars” [not adjusted for inflation]. Since then, each time the US debt was approaching the debt ceiling limit, congress would raise the limit – which has happened like 76-78 times, depending on who you ask.
And so the current debt ceiling (it’s like 14 trillion and something) was “reached” sometime in March, and the government can’t borrow any more money – so we’ve just been paying the interest on our loans. But we’re going to run out of money to pay that interest pretty soon, about August 3, is what’s been estimated, so we either have to raise the debt ceiling or default on our loans, which is basically saying “uh, hey folks, remember when we said we would pay you back? Well, we can’t. Don’t know what you wanna do about that.”
People argue about what would happen if we defaulted. Some say that the world economy would, if not completely collapse, definitely develop a very nasty limp. Others say that it wouldn’t be all that bad for reasons I don’t quite understand. Some people say that China (which owns more than half of all our foreign-held debt) will come over and shake us upside down so our lunch money falls out of our pockets. Rush Limbaugh says that Obama chose August 2nd as the deadline because it’s the day before Ramadan.
Since 1962 Congress has raised the debt ceiling 72 times
So what’s different now from all those other times that the debt ceiling was raised, as far as I can tell, is that Republicans, who hold the majority of the house of representatives, think that they can use the urgency of the situation to get the Dems and the White House to agree to a budget that they wouldn’t normally approve. This is coupled with the fact that there is a bigger representation of the Tea Party, especially among junior representatives, than there has been before, and many of those junior representatives campaigned on promises to not raise taxes or do anything that looks or smells remotely like raising taxes ever in their lives. There are two ways to reduce deficit: reduce spending and raise taxes. The Republicans are pushing budgets that reduce spending but don’t increase taxes (or even just let the Bush tax cuts expire, or reform corporate tax laws that allow corporations to take loopholes and get out of paying taxes at all). This makes this difficult for everyone to get along.
So that’s the summary of what’s sort of going on. As the date draws nearer, things get sketchier – like, right now, it’d be impossible for anyone to write up a comprehensive budget by then. There was even talk of the Republicans just making a decision to not raise the ceiling, which the president can then veto, just so they can still say they voted against it. The closer we get to August 3, the hairier and more confusing things get. But that’s an attempt at a summary of the context of the whole issue.