The U.S. government has spent more than it earns every year since the early 2000s. The government has now borrowed all the money it legally can and is using tricks to keep paying for itself. The tricks will run out in August. If Congress does not vote to raise the debt limit by then, the U.S. government will not be able to pay the bills. The Republicans forced a vote in the House of Representatives on raising the debt limit and, on purpose, voted it down. One thing they avoid saying is what, exactly, it will mean if the debt limit is not raised.
This fiscal year the U.S. government is expected to borrow a total of $1.65 trillion, 43% of all expenditures. When the tricks run out we must immediately balance the budget; i.e., raise taxes or cut 43% of all expenditures. While I'm a big fan of balancing the budget, doing so immediately would have some serious consequences.
Consider that government expenditures are more-or-less as follows:
Now consider eliminating the interest on the debt, which would solve less than 1/4 of the problem. It would immediately make $14 trillion in government bonds worthless. The resulting economic crash would tank tax income and you'd need to make even more massive cuts.
The bottom line is that failing to raise the debt limit is gross fiscal irresponsibility. If the Republican threat is real, they are willing to seriously weaken America to get their way. This is particularly bizarre as every penny of spending must be approved by the Republican-controlled House of Representatives so they have all the power they need to cut spending via the normal budget process.
When election time comes, remember who is acting responsibly and who is not.
Al Globus' Politics