Raising The Debt Limit (S. 1569)

What is S. 1569?

(Updated January 31, 2017)

This bill would prevent a cap from being imposed on the public debt limit through December 31, 2015.

In layman’s terms, the debt limit is the amount of money the federal government can legally borrow to meet its existing obligations. These obligations cover an enormous range of services, from Social Security and Medicare benefits to tax refunds and interest accrued on the national debt. In this context, an obligation is anything that the federal government owes funds toward before January 1st, 2015.

S. 1569 would give the federal government permission to continue increasing the debt limit through January 2015, provided that the government still owes more money to pay for various obligation than it can currently meet without exceeding the debt limit. This is almost guaranteed to happen given the scope of federal obligations: the current debt limit is more than 16.7 trillion dollars.

Argument in favor

Failing to raise the debt limit won’t just impact crucial services — it could cause the nation to default on its debts, triggering a collapse in the financial market as well as a recession, or even a depression, in the global economy.

Argument opposed

Why have a debt limit — much less constantly worry about raising it — when Congress already approves all borrowing by the federal government? Numerous countries get by without a debt limit, why is the U.S. still burdened with one?

Impact

The debt limit, the government, all federally-funded services, everyone who depends on those services, people who work to provide those services, the national economy, and the global economy.

Cost of S. 1569

A CBO cost estimate is unavailable.

Additional Info

Of Note:

For all of its existence, the debt limit has been the subject of repeated increases — and repeated complaints. Members of congress have sometimes used it to introduce riders to the floor for an easy vote. They’ve also opposed raising the debt limit when they want to to gain leverage on other legislation, like the GOP did in 2013 to demand massive spending cuts. This standoff resulted in a government shutdown, which resulted in the suspension of federal borrowing, and consequently, the temporary end to numerous federal programs.

In introducing this bill, Sponsoring Sen. Harry Reid issued a warning of the dire consequences that would follow if Congress fails to increase the debt limit for the coming year:  

“If we allow the United States to default on its debt for the first time in our glorious history, it will be a black mark on our reputation, and that is a gross understatement. There will be a financial disaster, and it will spark a global recession.”

This isn’t necessarily as hyperbolic as it sounds. While the government might be able to flake on some of its bills, failure to make an interest payment on the national debt would deal a severe blow to the status of U.S. Treasury bonds, which underpin financial markets around the globe. It’s not a stretch of the imagination to picture the economic disaster that would follow this kind of crisis.

Despite all the hullabaloo, President Obama has mostly put the issue to bed by successfully passing legislation that will extend the debt ceiling through the spring of 2015. But there’s no guarantee that it won’t be re-kindled as an issue for the 2016 election.  

Media:

Bill Sponsor Sen. Harry Reid (D-NV) Press Release

Washington Post

Reuters