Here’s a handy guide that MSNBC has laid out for those of us who are “debt limit challenged”.
What really happens if the U.S. fails to pay interest, principal on Treasury bonds?
President Barack Obama and Republican congressional leaders are locked in a tense standoff over how much spending and debt the federal government can afford. Here’s a guide to the fight over the debt limit:
What is the debt limit?
It is the statutory limit on the amount of federal debt.
In February 2010, Congress passed legislation to increase the debt limit to $14.29 trillion. Since 1993, Congress has voted to increase the debt limit 16 times.
Treasury Secretary Tim Geithner has warned Congress that if it doesn’t vote to increase the debt ceiling before the government reaches its borrowing limit on Aug. 2, it would trigger a default by the United States.
A default “would have catastrophic economic consequences that would last for decades,” Geithner said, by spurring ruinously high interest rates and threatening “the dollar’s dominant role in the international financial system.”
Why are congressional Republicans refusing to raise the debt ceiling?
Republicans argue that federal spending — which is now nearly 25 percent of GDP — must finally be brought under control. The only way to force Obama to agree to spending cuts is to refuse to raise the debt limit, they argue.
Obama said Monday that he agrees with Republicans that trillions of dollars of spending cuts are needed over the next decade, but he also wants to get rid of certain tax breaks that cause the government to lose revenue. At a Tuesday press briefing, he invited congressional leaders to continue negotiations at the White House.
Negotiators for the Obama administration and Congress have discussed about $2.4 trillion in spending cuts over the next ten years — about a 5 percent cut in total projected spending.
“I believe the Republican strategy will eventually result in some increase in the debt limit with very limited tax increases, but none of those tax increases will be in marginal (income tax) rates,” said Bill Hoagland, former top staffer on the Senate Budget Committee under Sen. Pete Domenici, R-N.M.
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