U.S. Rep. Sander Levin shares his thoughts from Washington, D.C.:
As the federal government shutdown enters its third week, time is also running out for Congress to raise the nation’s debt limit. In its 224-year history, the United States government has never defaulted on its obligations, and for a very good reason. Default could have catastrophic results: Credit markets could freeze; the value of the dollar could plummet; and U.S. interest rates could skyrocket, potentially triggering a financial crisis and recession.
As a new analysis shows, a U.S. default would also impact nearly every American. While no one knows the full extent of the damage, American families could face higher interest rates for mortgages, auto loans, student loans, and credit cards, as well as a drop in their retirement savings, and the possibility of disabled veterans and seniors not receiving benefits on time.
So what is the debt ceiling and why is it suddenly a problem?
The debt ceiling is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations -- everything from paying Social Security and Medicare benefits, to military salaries, to interest on the national debt, tax refunds, and other payments. A debt limit increase simply allows the U.S. Treasury to pay bills for spending Congress has already approved.
Under Republican and Democratic presidents alike, Congress has always acted to raise the debt ceiling. This year, however, House Republicans are refusing to approve a clean extension of the debt limit and have instead offered a short-term extension of the limit that is tied to unrelated policy demands, including changes to the health care reform law. Democrats and President Obama take the position that it is dangerous to threaten the full faith and credit of the United States to further a political agenda. Rep. Levin recently introduced the Default Prevention Act of 2013 [H.R. 3284] which provides for a clean extension of the debt limit through the end of 2014.
The Secretary of the Treasury has indicated that sometime around October 17 the U.S. will not be able to pay all of its bills and would default for the first time in our nation’s history. Congress has so far been unable to reach agreement on a plan to raise the debt limit and end the 3-week-old shutdown of the federal government. Negotiations are continuing this week.