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Not being able to pay your bills is never a good thing — especially when you’re the United States government.
Treasury Secretary Jack Lew has announced that the U.S. will hit its $16.7 trillion borrowing limit in mid-October.
In 2011, the White House and congressional Republicans feuded over raising the debt ceiling, spending weeks trying to come to an agreement. Those talks failed and the financial markets roiled in reaction.
Failure to reach an agreement would trigger a partial government shutdown, and the Treasury Department would be unable to pay America’s bills.
JEREMY HOBSON, HOST:
From NPR and WBUR Boston, I'm Jeremy Hobson. It's HERE AND NOW.
Treasury Secretary Jack Lew has announced that the U.S. will hit its $16.7 trillion borrowing limit in mid-October. And if that sounds like deja vu, that's because it is. In 2011, the White House and congressional Republicans feuded over the debt ceiling, spending weeks try to come to an agreement. Those talks failed and the U.S. got its AAA credit rating downgraded. So what does another debt ceiling crisis mean? Jason Bellini of The Wall Street Journal joins us. And, Jason, break this down for us first. Why October 15?
JASON BELLINI: Hi, Jeremy. Well, you know, this date is a lot sooner than many on Capitol Hill had expected. The Treasury Department, they did the math, and they figured out they're going to be unable to pay all their bills soon after the 15th, and that, of course, narrows the window that the White House and Congress have to maneuver on their budget talks and their talks on the debt ceiling. So they have both of these coming right on the heels of one another.
Treasury Secretary Jacob Lew said after mid-October, the government will only have $50 billion in cash, and the government will burn through that really quickly.
HOBSON: And as you say, this narrows that window. The other deadline is the end of September, right? Or the beginning of October, the White House would need to reach an agreement to keep the government from shutting down or a partial shut down. So how does that play into this exactly?
BELLINI: Well, it's looking like this - they'll deal with that problem first, which is, you know, dealing with this budget issue. And John Boehner has said that he intends to move very quickly. As soon as lawmakers get back to Washington, they'll pass a short-term spending bill, most likely at current levels that will keep the government running for 60 to 75 days. It'll get them through mid-November.
And basically, punts away this vocal minority Republicans who want a budget bill that defunds the White House health care law, so that's going to happen in the September spending bill is what we're hearing. But it may happen when we go into this issue of the debt ceiling. That's where they may decide to make this big push, and the White House is already having none of it.
HOBSON: And as we said, the last time around, of course, the nation's credit rating was downgraded. It lost its AAA credit rating. How might the economy may be impacted this time around if there is another stalemate over raising the debt ceiling?
BELLINI: Right. So, I mean, either they do this the easy way, which is to pass a bill, or the hard way. The easy way, they reach a big budget agreement, or this could end up being like an epic fiasco, seriously. The White House - I mean, lawmakers, economist, business leaders, they're warning of a possible financial crisis if this happens. Interest rates will likely spike. Bonds and stock markets will become extremely volatile, especially if the value of treasury securities came into question. So this is a very big deal.
HOBSON: And reminds us again, what exactly happened in 2011. In the end, after all of that, after the downgrade, they did actually increase the debt ceiling, right? And I thought - it seemed as though they had learned their lesson.
BELLINI: Well, they did. I mean, those talks collapsed in July of that year, July 2011, and the financial markets, they swung wildly. And so Congress got its act together. The debt ceiling was increased in early August. That was part of the Budget Control Act. Now that set the caps on spending levels that - to the across-the-board sequester cuts that are still in effect. Those began in March of that year, and they're scheduled to continue through 2021. At the time, that was supposed to be a poison pill that the president agreed to. And they thought, well, we'll figure this out later, but those cuts are still very much in place.
HOBSON: Maybe there will be another sequester on the way. Jason Bellini of The Wall Street Journal thanks so much as always.
BELLINI: Thank you.
HOBSON: And still to come, ahead of tomorrow's 50th anniversary of the March of Washington, we'll speak with one of the organizers of the original march, Congresswoman Eleanor Holmes Norton. We're back in a minute with that. HERE AND NOW. Transcript provided by NPR, Copyright NPR.