Sen. Chris Van Hollen on debt ceiling and reconciliation

Politicians in Congress are currently in a staredown over the debt ceiling. Lawmakers must reach an agreement soon to allow the government to meet its payment obligations for Social Security, tax credits and military salaries, among other items.

Treasury Secretary Janet Yellen warned that the Treasury will likely run out of ways to pay its bills at some point in October.

Democrats want to suspend or increase the debt limit through legislation. However, Senate Minority Leader Mitch McConnell, R-Ky., has said that Democrats need to find a way to pass it without any support from the GOP.

Democrats argue that raising the ceiling will simply allow the U.S. Treasury to pay for spending and tax cuts that were greenlit during the Trump administration, while Republicans say they won’t help lift the debt limit because of the Democrats’ $3.5 trillion spending plan. Suspending or increasing the limit does not authorize any new spending.

The Republican opposition may force Democrats to lift the ceiling on their own as part of the spending package, which they plan to pass without the GOP through budget reconciliation. The process requires only a simple majority in the Senate split 50-50 by party.

So what does all this mean for you? Here’s what the debt ceiling is and how a failure to raise it could have far-reaching effects in the economy.

What is the debt ceiling?

Put simply, the debt ceiling is the maximum amount of money that the U.S. Treasury can borrow in the form of bond sales. This money is used to pay for a wide-ranging number of financial obligations each month, including Social Security payments, Medicare reimbursements and other programs like tax refunds.

Without congressional permission to continue taking out debt — which is necessary because the government spends more money than it takes in via taxes — the Treasury can’t continue to fund its obligations.

The debt limit has been regularly increasing since it was first introduced in 1917, and since 1960 the debt ceiling has been in some way raised or suspended 78 times under presidents from both parties, according to the Treasury’s website.

It is currently suspended, and the Congressional Budget Office estimated in July that it needs to be raised from $22 trillion to $28.5 trillion. The Treasury also says that to fail to raise the ceiling, and as a result allow the government to default on its debts, “would have catastrophic economic consequences.”

″[The debt ceiling] is a century-old attempt to restrain federal spending,” Bankrate analyst Mark Hamrick tells CNBC Make It. ”[Raising the ceiling] is a necessary step to allow the Treasury to effectively engage in the expenditures which have already been approved by two branches of government.”

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[mharding]

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." Obama: 2006

[virtuousxvillain]

The democrats have full power to pass it or not to pass it.

[omarlocke]

we don’t have to raise the debt to pay bills. we’ll only make more debt. we should just pay what we owe now and then we solve the problem

[manmadesounds]

Reconciliation pays for itself. It's always the Republicans and corporate Democrats howling about debt and deficits when proposals are on the table to help non-rich people.

[DavidSmith-egle]

Well that's just great I'm on disability I am autistic and I guess I'm going to be out in the street now because they can't agree to disagree and get the debt ceiling through they need to either do it through reconciliation needs to happen immediately or else I could see some civil unrest happening