Debt limits, sequestration, government shutdowns... It’s all back after Treasury Secretary Jacob Lew warned yesterday that Congress has about six weeks before the country hits its $16.7 trillion debt ceiling.
The battle lines that have been drawn since 2010, and haven’t gone away. House Speaker John Boehner has said he won’t raise the debt ceiling without real cuts in spending. President Obama’s spokesperson Jay Carney said yesterday that the administration won’t negotiate with Republicans over Congress’ responsibility to pay its bills.
On top of that, Congress and the president must reach some kind of federal budget deal by the end off September. If they don’t reach an agreement on that, some parts of the government will shut down.
Lew says if the debt ceiling isn’t raised it would cause irreparable harm to the nation’s economy. By mid-October, he said the government will be left will about $50 billion in cash on hand, which could be wiped out in a day. Interest rates could spike and potentially throw the markets into a downward spiral.
If the country doesn’t have enough cash on hand to pay its bills, the government would have to prioritize its obligations, such as paying bond holders, or Medicare bills.