Raising debt ceiling could have strings

David Gura Apr 14, 2011
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Raising debt ceiling could have strings

David Gura Apr 14, 2011
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Steve Chiotakis: First there’s likely to be a vote today in the U.S. House and Senate on the budget compromise that cuts billions of dollars from this year’s federal spending. And it’s a day after President Obama outlined his own long-term plans to trim the deficit, with spending cuts and higher taxes on the wealthy. But the president didn’t say anything about raising the debt ceiling.

Indeed, some lawmakers are being more vocal about the possibility of voting no to raising the ceiling. Unless mandatory spending cuts are included.

From Washington, Marketplace’s David Gura reports.


David Gura: In just a few weeks, the national debt is expected to reach $14.3 trillion. If some lawmakers attach conditions to borrowing more, that fight could lead to default.

Guy LeBas: The “d word” is very scary.

That’s Guy LeBas with financial services firm Janney Montgomery Scott. If the U.S. defaults, federal programs paid for with bonds could stop, banks that hold Treasuries would restrict lending, and experts say the economy could tank.

LeBas: You know, you’ve got two parties driving toward each other at high speed. If nobody blinks, everybody loses big.

Banking consultant Bert Ely says this fight could go down to the wire.

Bert Ely: But I think at the end of the day everybody realizes that it would be very detrimental to the federal government and ultimately the American taxpayer for any kind of actual outright default on federal debt.

We’ll see who blinks first.

In Washington, I’m David Gura for Marketplace.

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