Congress has raised the federal debt ceiling limit 10times in the past 10 years, and Treasury officials say the government will hit the current $14.3 trillion limit no later than May 16. Without another increase, the government will either default on its bonds or have to slash spending by about 40 percent. Republicans say they won't vote for an increase without big additional cuts in spending.
When it comes to debt, the United States Congress is all grown up. They can make their own rules--and have 10times over the past 10 years. According to a warning letter sent recently from Treasury Secretary Timothy Geithner to Senate Majority Leader Harry Reid, D-Nev., it’s time to change the rules again.
Unless Congress votes to raise the debt limit, the United States could hit its statutory debt ceiling by May 16. Geithner warned Reid that unless the ceiling is raised, the Treasury would not be able to borrow money to meet the needs of the country, including “military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits, and tax refunds.”
Since the debt limit’s introduction in 1917, Congress has never failed to raise it. But now, in the midst of a serious spending debate, some Republicans may threaten to hold the increase hostage unless they see substantial cuts in government spending. Sen. Kelly Ayotte, R-N.H, said on Wednesday, “As a new member of the Senate, I refuse to perpetuate this cycle. We cannot let this moment pass us by and I cannot in good conscience raise our debt ceiling without Congress passing real and meaningful reforms to reduce spending. That plan should include a Balanced Budget Amendment, statutory spending caps, spending cuts, and entitlement reform."
To be clear, reaching the debt ceiling would not directly trigger a government shutdown in the way a failure to negotiate a budget would. And the debt is not to be confused with the deficit, which represents the difference between spending and revenue, but is vulnerable to its effects.
CORRECTION: An earlier version of this story did not include the raising of the debt ceiling in December 2009.