News / USA

Stakes High in US Battle Over Debt Limit

Treasury Secretary Timothy Geithner arrives on Capitol Hill in Washington to testify before the committee's hearing on the Treasury Department's fiscal 2011 budget, April 5, 2011
Treasury Secretary Timothy Geithner arrives on Capitol Hill in Washington to testify before the committee's hearing on the Treasury Department's fiscal 2011 budget, April 5, 2011

Multimedia

Audio

The political wrangling in Washington about federal budgets is likely to get more intense as the stakes rise from billions of dollars to trillions.  Some of the focus is changing from a squabble over government spending for one year, to a bigger battle over the soaring debt accumulated over many years. Some of the bickering is over the "debt limit," an issue that is generally not well understood.

U.S. Treasury Secretary Timothy Geithner says the stakes in the fight over the debt limit are very high.

"The consequences would be catastrophic to the United States.  Default by the United States would precipitate a crisis worse than the one we just went through," said Geithner.  "I think it would make the crisis we just went through look modest in comparison."

Geithner's point is that if Congress does not take action to raise the debt limit, current spending commitments and the need to refinance the government's earlier loans might force Washington to miss payments on existing U.S. debt.  That could cause major economic problems because investors might drastically raise interest rates which would raise costs and compound the problem.

"[Default] would be a reckless and irresponsible act of this country.  I find it inconceivable that Congress would not act to increase the limit," added Geithner.

For many years, Washington has been spending more than it takes in from taxes and other sources of revenue.  That leaves a deficit in the annual budget.  The government has to borrow money to cover the shortfall.  All these annual deficits add up to the total debt.  

Under U.S. law, the Treasury Department cannot borrow more money by issuing bonds unless Congress gives its approval by increasing the legal limit on borrowing.  The current debt limit is more than $14 trillion, a sum nearly equivalent to all the goods and services produced in the United States in a year.  

The government is expected to hit its debt limit next month.

There has been a debt limit law of some kind in the United States for nearly a century.  During that time, the limit has been lowered on a few occasions, and raised more than 60 times.  

As the limit approaches Republicans are pressuring President Barack Obama and his Democratic Party allies in Congress to cut spending on social programs and keep taxes low.   The Democrats want to deal with the debt by raising taxes on wealthy Americans and cutting military programs.

A former high-ranking Treasury Department official, Timothy Bitsberger, says the two sides will eventually make a deal to avoid default, but only after a flood of rhetoric.

"There's a lot of political theater involved...  I expect the Republicans will try to extract as much blood as they can as the debt negotiations go forward," said Bitsberger.

Bitsberger spoke in an interview on the Bloomberg financial news service.  He worked on debt limit issues at the Treasury Department during a previous Republican administration, and says deficits and debt have grown under both Republicans and Democrats.  

While there are deep divisions between the two political parties, the global credit-rating agency Fitch says the likelihood of a default is "extremely low."

The top analyst on U.S. government debt at Moody's Investor Service, Steve Hess, says only an "astonishing miscalculation" by the government would lead to default.   He says bickering over spending cuts may continue until the very last moment, and might force officials to take "Draconian" actions to manage short-term financial problems.

Hess says if political squabbling really worried lenders, they would raise interest rates they charge on loans to Washington.  

"If you look at the market, it does not seem that the wrangling so far has had a big effect on the government's cost of borrowing," noted Hess.

Continuing annual deficits have made the total debt double in the past few years, and many members of Congress believe continuing that course will eventually raise the debt so high it would cause a severe economic crisis.

You May Like

Ukraine: Mysterious 'Roaming Tank' Reportedly Takes Aim at Smugglers

Ukraine's TV, print media, Facebook abuzz with reports a 'roaming tank' is on the loose, destroying vehicles of those involved in smuggling More

US Wildlife Service Begins Probe of Killing of Cecil the Lion

Minnesota man accused of killing beast is in hiding, has been asked to contact US officials; White House to review extradition petition More

Video Kerry Five-Nation Tour to Cover Security, Iran Nuclear Deal

Secretary of state will visit Egypt, Qatar, Singapore, Malaysia, Vietnam to discuss security issues, Iran nuclear deal, Trans-Pacific Partnership More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Booming London Property a ‘Haven for Dirty Money’i
X
July 29, 2015 9:34 PM
Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.
Video

Video 'Metal Muscles' Flex a New Bionic Hand

Artificial limbs, including the most complex of them – the human hand – are getting more life-like and useful due to constant advances in tiny hydraulic, pneumatic and electric motors called actuators. But now, as VOA’s George Putic reports, scientists in Germany say the future of the prosthetic hand may lie not in motors but in wires that can ‘remember’ their shape.
Video

Video Russia Accused of Abusing Interpol to Pursue Opponents

A British pro-democracy group has accused Russia of abusing the global law enforcement agency Interpol by requesting the arrest and extradition of political opponents. A new report by the group notes such requests can mean the accused are unable to travel and are often unable to open bank accounts. VOA's Henry Ridgwell reports.
Video

Video 'Positive Atmosphere' Points Toward TPP Trade Deal in Hawaii

Talks on a major new trade agreement among 12 Pacific Rim nations are said to be nearing completion in Hawaii. Some trade experts say the "positive atmosphere" at the discussions could mean a deal is within reach, but there is still hard bargaining to be done over many issues and products, including U.S. drugs and Japanese rice. VOA's Jim Randle reports.
Video

Video Genome Initiative Urgently Moves to Freeze DNA Before Species Go Extinct

Earth is in the midst of its sixth mass extinction. The last such event was caused by an asteroid 66 million years ago. It killed off the dinosaurs and practically everything else. So scientists are in a race against time to classify the estimated 11 million species alive today. So far only 2 million are described by science, and researchers are worried many will disappear before they even have a name. VOA’s Rosanne Skirble reports.
Video

Video Scientists: One-Dose Malaria Cure is Possible

Scientists have long been trying to develop an effective protection and cure for malaria - one of the deadliest diseases that affects people in tropical areas, especially children. As the World Health Organization announces plans to begin clinical trials of a promising new vaccine, scientists in South Africa report that they too are at an important threshold. George Putic reports, they are testing a compound that could be a single-dose cure for malaria.
Video

Video 'New York' Magazine Features 35 Cosby Accusers

The latest issue of 'New York' magazine features 35 women who say they were drugged and raped by film and television celebrity Bill Cosby. The women are aged from 44 to 80 and come from different walks of life and races. The magazine interviewed each of them separately, but Zlatica Hoke reports their stories are similar.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.

VOA Blogs