Breaking Down the Debt-Ceiling Debate
June 13, 2011
What you can expect if the government doesn't find a middle ground on the debt ceiling
The U.S. government has found itself in the crosshairs of another credit rating agency, as progress on increasing the debt limit continues to stall amid political turmoil.
"The heightened polarization over the debt limit has increased the odds of a short-lived default," the
Some critics accuse lawmakers of using the debt ceiling dilemma as a political bargaining chip in the run-up to the 2012 elections, but if this political game of chicken drags on much longer, the U.S. government and taxpayers could face serious repercussions in the form of increased borrowing costs and an erosion of investor confidence in Uncle Sam's ability to manage its finances.
But how much of the debate is political maneuvering and partisan defiance?
What is the debt ceiling?
The debt ceiling -- currently
The government hit the debt ceiling
What happens if the debt ceiling isn't raised before
At this point, no one knows exactly what will happen, but the
Default by the U.S. government could result in "the loss of millions of American jobs," according to the Treasury, and jeopardize the government's reputation as a credible borrower.
"If we fail to make timely payments on time, the world would not enter a cataclysmic disaster," says
The U.S. government has enjoyed a relatively unchallenged position as a safe haven among bond investors, but uncertainty about its finances could translate into higher borrowing costs. That means more taxpayer dollars would have to go toward debt service.
While Geithner has imposed an
What's the point of the debt ceiling?
In theory, the debt ceiling is meant to help
"You've got two opposing political parties, each trying to score points before the next election and make the other side look as bad as possible and we, the American public, are going to suffer as a result," says Angel. "The real question is, do we keep paper shuffling or do we bring on Armageddon and bring down the other side?"
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