Another day, another debt ceiling discussion. We’re set to hit the debt ceiling by this Friday, February 7. And this time, the Treasury forecasts that the U.S. will be out of “extraordinary measures” (read: accounting gimmicks) within a few weeks, so there isn’t much time to figure things out.
Congress has raised or suspended the debt ceiling four times since 2010, according to a report by USA Today, and yet no real solution has been found–so we’re back to this old argument, once again dithering over whether or not the United States will actually pay its bills.
This time, Treasury Secretary Jacob Lew is asking Congress to extend the debt limit before it “can cause harm to our economy.”
The debt limit, in case you have forgotten, is merely an upper limit on the amount of money the government can borrow. Raising the debt limit does not actually increase the debt–the debt has already been decided through the budget process completed a few months ago.
The debt will still exist, so not raising the debt limit will only mean that the U.S. has decided not to pay those debts–not unlike underwater mortgage holders who walked away from their homes during the housing crisis.
The current debt limit is $17.2 trillion. (Some good news, though: the deficit has fallen, down to only $514 billion–a 27% drop from last year, and the smallest deficit since 2007.)
If no solution is found–and quickly–the Treasury department won’t be able to pay what it owes, including issuing tax refunds to American citizens. (The IRS began processing refunds February 1, so this process has already begun.) Since many people rely on those refunds, any delay in raising the debt limit is likely to have a direct effect on the economy.
How would you resolve this debt limit crisis? What will you do if your tax refund is delayed because of it?
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