Shutdown. Debt ceiling. Sequestration.
You've probably heard all these terms swirling around in recent weeks and months. But what do they mean? How are they similar and how are they different?
Here's what you need to know:
Government shutdown is looming
A government shutdown is the common term for what's
officially a lapse in appropriations, or planned government spending. By law,
Congress must approve 12 separate appropriation bills by Sept. 30 of each year.
If those aren't approved, there's only one alternative: pass a Continuing Resolution, which serves as a short-term plan until the 12 larger bills are passed. The Continuing Resolution or "CR" currently being discussed would keep the government operating through Dec. 15.
The Republican-led House of Representatives passed a new CR last week, but it included a controversial provision to defund the Affordable Healthcare Act. The Democrat-controlled Senate is all but sure to strip that provision from the bill before sending it back to the House, leaving Congress at an impasse.
If the House and Senate don't pass a bill by Monday at midnight, the government effectively "shuts-down." If that happens, federal employees deemed non-essential will be furloughed and many agencies will stop or curtail operations Oct. 1. Unlike sequestration furloughs, which for most agencies were implemented across-the-board, agency heads will have more flexibility on who is deemed essential in the event of a shutdown.
The CR debate does not impact so-called mandatory spending
such as Medicaid, Medicare, Social Security or unemployment payments. Military personnel would remain on the job but wouldn't be paid until a new appropriations bills is approved.
Government shutdowns are not new. It took a last-minute deal in April 2011 to avert a shut-down. The government shut down several times in the 1970s and for 28 days from December 1995 to January 1996.
Debt ceiling...we're already thereThe U.S. has a limit on the amount of money it can borrow. That amount is known as the "debt ceiling." The U.S reached that limit in May and it took what the Treasury Department described as "extraordinary measures" to keep the money flowing since then.
Those measures will be exhausted Oct. 17, also known as the "X-Date."
If that X-Date comes without Congressional approval to raise the debt ceiling, the Treasury, essentially, won't be able to pay all that day's bills. The U.S. would be unable to pay about 30 percent of its payments until the debt ceiling is raised, according to Treasury officials.
The Treasury currently makes about 80 million payments a month.
Congress has to pass a separate bill to increase the country's debt limit - currently $16.7 trillion - which means another round of financial wrangling mixed in with the shutdown talks. Some lawmakers have tried to tie the new CR into the debt ceiling debate but the White House said the debt ceiling won't be used as a bargaining chip.
If the U.S. government was unable to make all necessary payments, it would technically go into default. The impact of the U.S. defaulting would include problems in the stock market or higher interest rates due to investors asking for higher returns on Treasury notes.
While the shutdown and debt ceiling are two different issues, they are linked. The CR passed in the House and being debated in the Senate would give bondholders and those who receive Social Security priority over other debtors in the event of a shutdown.
Sequestration...the slow burn
Sequestration is part of the Budget Control Act of 2011. It was set to start Jan. 1 of this year but was delayed until March 1. If it's not repealed, sequestration cuts will last through 2023.
Sequestration is a series of automatic across-the-board spending cuts totaling about $1 trillion over the next decade. The cuts are split between the Department of Defense and non-defense agencies. Programs such as Social Security, Medicaid, federal pensions and veteran's benefits, as well as military pay, are exempt.
While proponents of the cuts said the impact has been less than predicted, the sequester has led to furloughs of federal workers, especially civilian DOD employees who were set to take up to 22 days of unpaid leave this year. That was later lowered to 11 and then finally, 6. The defense cutbacks have limited training and prolonged deployments, according to the Pentagon.
Officials have little leeway in the cuts, though Congress has given flexibility to some agencies to prevent cutbacks, most noticeably to the Federal Aviation Administration to prevent the furlough of air traffic controllers.
The House's CR leaves sequestration in place. Sen. Barbara Mikulski, D-Md., chair of the Senate Appropriations Committee, said she plans to offer a proposal for a new CR to keep the government open until Nov. 15 to allow for more time to a budget deal to be reached. Included in her plan is a proposal to repeal the sequester in return for $110 billion in new federal spending cuts and tax revenues. Republicans have opposed any plan that includes tax increases.