Understanding the national debt limit and what spending cuts could mean to you
As President Barack Obama and a bipartisan group of lawmakers prepare for a summit Sunday at the White House to discuss reducing government spending and raising the debt ceiling, the question remains: What happens if Congress doesn’t raise the $14.294 trillion debt limit before Aug. 2?
No one knows for sure. Congress has always agreed to raise the debt ceiling. It has raised the limit 74 times since March 1962. And that will most likely happen this time, eventually. But as late as Friday, Republican House Speaker John Boehner was still saying there’s no “imminent deal.”
So, assuming we reach Aug. 2 with no agreement, the Treasury Department would not have authority to borrow any more money. That’s a problem because the government borrows to make up the difference between what it spends and what it takes in.
The Bipartisan Policy Center, a think tank established in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell, has released an analysis that shows federal spending would have to be reduced by as much as 44 percent for the remainder of August as the Treasury prioritizes payments to remain under the debt limit.
ProPublica has created a post, The Basics Behind the Debt Limit Debate: More Partisan Than Practical?, that compiles more information about the national debt limit with links to other Q&A's.
Or Obama could just ignore the limit, according to a piece in Slate. Former Republican economist Bruce Bartlett wrote in a column in the Fiscal Times that the president didn’t need Congress’s permission to raise the debt limit. “The debt limit is statutory law, which is trumped by the Constitution which has a little known provision that relates to this issue,” Bartlett wrote. “Section 4 of the 14th Amendment says, ‘The validity of the public debt of the United States … shall not be questioned.’’’ The way he read it, if Congress wouldn’t raise the debt limit, the president could start creating debt anyway. “Constitutional history is replete with examples where presidents justified extraordinary actions by extraordinary circumstances.”