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

    Video Democrats Clinton, Kaine Offer 'Very Different Vision' Than Trump

    In a jab at Trump, Clinton says her team wants to 'build bridges, not walls'; Obama Hails Kaine's record; Trump calls Kaine a 'job-killer'

    Turkey Wants Pakistan to Close Down institutions, Businesses Linked to Gulen

    Thousands of Pakistani students are enrolled in Gulen's commercial network of around two dozen institutions operating in Pakistan for over two decades

    AU Passport A Work in Progress

    Who will get the passport and what the benefits are still need to be worked out

    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.
    In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movementi
    X
    July 22, 2016 11:49 AM
    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Poor Residents in Cleveland Not Feeling High Hopes of Republican Convention

    With the Republican Party's National Convention underway in Cleveland, Ohio, delegates and visitors are gathered in the host city's downtown - waiting to hear from the party's presidential candidate, Donald Trump. But a few kilometers from the convention's venue, Cleveland's poorest residents are not convinced Trump or his policies will make a difference in their lives. VOA's Ramon Taylor spoke with some of these residents as well as some of the Republican delegates and filed this report.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video With Yosemite as Backdrop, Obama Praises National Parks

    Last month, President Barack Obama and his family visited some of the most beautiful national parks in the U.S. Using the majestic backdrop of a towering waterfall in California's Yosemite National Park, Obama praised the national park system which celebrates its 100th anniversary this year. He talked about the importance of America’s “national treasures” and the need to protect them from climate change and other threats. VOA’s Julie Taboh reports.
    Video

    Video Counter-Islamic State Coalition Plots Next Steps

    As momentum shifts against Islamic State in Iraq, discussions are taking place about the next steps for driving the terrorist group from its final strongholds. Secretary of State John Kerry is hosting a counter-IS meeting at the State Department, a day after defense ministers from more than 30 countries reviewed and agreed upon a course of action. VOA Pentagon correspondent Carla Babb reports.
    Video

    Video Russia's Participation at Brazil Olympic Games Still In Question

    The International Olympic Committee has delayed a decision on whether to ban all Russian teams from competing in next month's Olympic Games in Brazil over allegations of an elaborate doping scheme. The World Anti-Doping Agency recently released an independent report alleging widespread doping by Russian athletes at the 2014 Winter Olympics in Sochi. So far, only Russian track and field athletes have been barred from the Summer Games in Brazil. VOA's Zlatica Hoke has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.
    Video

    Video Millennials Could Determine Who Wins Race to White House

    With only four months to go until Americans elect a new president, one group of voters is getting a lot more attention these days: those ages 18 to 35, a generation known as millennials. It’s a demographic that some analysts say could have the power to decide the 2016 election. But a lot depends on whether they actually turn out to vote. VOA’s Alexa Lamanna reports.

    Special Report

    Adrift The Invisible African Diaspora