We’ve made it to May. Up until now, the big date was tax-filing day — April 15.
Now, mark May 19 on your calendar. That’s the debt ceiling deadline.
You remember the debt ceiling. It’s the amount of money Uncle Sam can borrow to pay bills.
There’s been some type of legislative restriction on federal debt since 1917. Most of the time, however, it’s been dealt with routinely. Regardless of who was in the White House or which party controlled Capitol Hill, Congress approved a debt ceiling increase and life in Washington, D.C., and the rest of the country went on as usual.
Then came 2011.
That year the Government Accountability Office issued a study that found “the debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.” Or, as President Barack Obama has said repeatedly, it means that we borrow to pay for programs Congress already authorized and put into place.
Debt ceiling disaster circa 2011
But also in 2011, Republican deficit hawks in Congress decided to use the debt ceiling to force their Democratic counterparts and the president to reduce the deficit. Cut spending, they demanded, or we’ll let the United States default on its debts.
That didn’t happen, but we came close, so close in fact that for the first time in our nation’s history the creditworthiness of the United States was downgraded. Awkward!
And costly. The credit downgrade led to a stock market plunge and an increase in Uncle Sam’s long-term borrowing costs.
Then things got worse. Really.
Under the debt ceiling deal reached at the last minute in the summer of 2011, the U.S. borrowing limit was raised in exchange for the creation of a bipartisan congressional super committee that would come up with balanced tax increases and spending cuts.
If that special committee couldn’t craft a plan, the final step would be sequester, or broad and painful automatic cuts in all programs. But no legislative body would be so dysfunctional as to let that happen, right?
How will Congress follow sequester?
Sequestration has been in effect since March 1. Aside from the recent rejiggering of Federal Aviation Administration funds to put workers back on the job and alleviate flight delays, the rest of the budget cuts continue. This month, the Internal Revenue Service will start closing its doors temporarily through the rest of the summer.
Which brings us back to May 19. That’s when we hit the debt ceiling again.
The Treasury Department this week said that it can keep borrowing “for a period of time” after May 19. Exactly how long? Treasury officials aren’t saying.
And what will Congress do this time as it once again faces the debt ceiling? The scary answer is, again, who knows?
You would think that as we are in the midst of sequester’s cuts, representatives and senators would make more judicious decisions, not just pander to a political base.
But then a lot of us thought that two years ago.
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Veteran contributing editor Kay Bell is the author of the book “The Truth About Paying Fewer Taxes” and a co-author of the e-book “Future Millionaires’ Guidebook.”