The standoff du jour in Washington is about a vote to raise the federal debt ceiling. Democrats and the White House insist it must be done—as does Wall Street—while fiscal conservatives and Tea Party activists are demanding serious concessions, and in some cases, an unconditional “no” vote. As the conversation reaches a crescendo, it’s useful to take a quick look at what the debt ceiling actually is, and what forces are at play in the debate.
When the United States needs to borrow money, the Treasury Department issues bonds in order to pay for the deficit spending. Before 1917, Congress had to approve this borrowing every time it happened, but World War I created a need for more flexibility and lawmakers gave the federal government unchecked borrowing powers, provided the total amount was less than a certain limit.
Congress now needs to approve any borrowing past the $14.3 trillion debt ceiling, which the United States will reach “no later” than May 16, according to Treasury Secretary Timothy Geithner. If Congress doesn’t raise the debt ceiling, the government would have to stop spending—including stopping interest payments on those Treasury bonds, meaning that the United States would effectively default on its debt.
Opportunistic Republicans have correctly understood this vote as a chance to force Democrats into approving several goals held by fiscal conservatives and the Tea Party. Though the debt ceiling will be reached because of past spending—including many Republican initiatives like the Medicare drug benefit and the costly invasion of Iraq—Republicans insist that concessions on future spending are needed before they will agree to raise the limit.
Senate Minority Leader Mitch McConnell (R-KY) said last month that all forty-seven Republican Senators were unified in their opposition to raising the debt ceiling unless “credible” efforts were made to cut federal spending. Speaker of the House John Boehner (R-OH) has also said his caucus would not vote to raise the debt ceiling unless “it is accompanied by meaningful action by the President and Congress to cut…the job-killing spending binge in Washington.”
Tea Party activists, meanwhile, are working furiously to ensure Republicans in Congress stand firm. The Tea Party Patriots, the largest organized Tea Party group in the country, warned that “Republican credibility as fiscally responsible managers of public resources is on the line” with the debt ceiling vote.