The “X” date is February 15-- at least according to Steve Bell, a senior official at the Bipartisan Policy Center as reported by the “Fiscal Times.” That is the date after which we can not pay our bills if Republicans in Congress follow through on their threats to not raise the debt ceiling
The federal government hit its debt limit on December 31st. As of that date the Treasury can not issue bonds, or borrow money from government trust funds to pay the bills. Treasury Secretary Tim Geithner is using “extraordinary measures” to move money and payments around to buy more time for Congress to act. All those measure buy us until February 15th or shortly thereafter.
The debt ceiling is a limit set by Congress on how much indebtedness the nation may incur to pay for spending Congress appropriated. Normally, Congress routinely raised the limit to match the appropriation bills it passed, as well as pay the interest on the debt it incurred by spending more than it was willing to tax.
The new normal for congressional Republicans is to Etch-A-Sketch the debt it ran up away by simply not paying it. They are using threats of defaulting on our debts as leverage to force Democrats and the White House to govern the way they would have if the voters had seen fit to give Republicans a majority in the Senate and control of the White House again. The GOP sees it as a way to nullify the election, or at least its consequences—a way to win even if they lost.
Last time we hit the limit Congress went to the brink before it passed a bill. The stock market dropped like a bunker-busting bomb from a B-52 and our AAA credit rating was downgraded. Republicans liked that so much they want to do it again.
President Obama said he is” not playing those games again.” So there is a stand off. A few things can happen: a) we will default on our debts, b) one side will blink meaning Republicans will raise the ceiling or Democrats will agree to cut Social Security, or c) the president will defy Congress and sell bonds to pay the bills, and tell Congress “sue me.”
Another option, if nothing happens, is the Treasury Department can pay what it can with the money available and let other bills go unpaid.
If that is chosen, the stock markets would certainly drop; our economy would suffer; our credit rating would be lowered by more agencies than just S & P, and the economy would tank.
Let’s suppose that is the precisely what Republicans in Congress want. Who and what would likely get paid, and who would get the shaft?
The Constitution mandates that the president must pay the lawful debts of the United States. So, the Executive Branch would have to first pay the interest on all our debt—external and internal. This means all debt held in bonds whether by Americans, or countries like China would be paid first. Then all interest and principal due on money the government borrowed from itself (Social Security, Medicare, and other trust funds) would be paid next--unless someone determines a debt we owe to ourselves is not really a debt.
Then pensions to federal workers and veterans would be paid followed by payments due to contractors engaged by government agencies, and payments due for materials procured under contract. Then tax refunds, if they are considered debt, would be put in the queue.
After that most, if not all, of the the money would be gone. That means to avoid running up debts that can not be paid, federal workers would have to be let go; departments would be shut down; services from the FAA to highways, military to unemployment; payments to farmers, foodtamps and all federal programs would be virtually eliminated or severely cut back. It would look like 1929 again—the good ole’ days.
Unless you are in the top of that priority list, you can expect to take a hit. We all will when the economy collapses, government ceases to function, and our lives are disrupted. This is what austerity Republican style looks like. It could be coming to a home near you.
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