Small wonder, then, that the debt ceiling fight has become an inescapable Washington story. So why are we here? And what, exactly, does all of this mean in plain English? We asked, to explain the subject in simple terms.Campante: The debt ceiling is the amount that the government is authorized to spend to cover its bills. The government is required to ask for Congressional authorization after the debt has been incurred to spend up to a certain amount.
It’s basically as if you spend more than what you earn. And then you have to get authorization to pay your credit card bill or something like that. I mean, the bill is already there, right? So you’ve already incurred the debt. So that’s the weird thing about it.Campante: As far as I’m aware, no other country does borrowing like this, sort of imposing these kinds of limits. It’s a kind of a uniquely American thing. It’s certainly not something that I think anyone would recommend doing.
It’s kind of a crazy way to do business. The best thing that one could do is to get rid of this need for having that authorization. You know, you decide how much you need to borrow, then you just pay for it, right? There’s there’s no point in having that separate instance, where after having incurred the bill, you decide whether we’re going to allow the government to pay it or not.Campante: Fundamentally, it’s like a hostage-taking situation.
The idea is that the government won’t want to have that financial crisis exploding. So try to use that to extract kind of unrelated concessions that are not really related to the specifics of the debt ceiling.Campante: Then it’s the question of, “what will the Treasury do in terms of prioritizing payment of the bills?” People talk about potential alternatives, where they could do something to kind of try and get around it.
Campante: It’s a crazy situation where you’ve already incurred debt, and then you’re basically deciding on whether to pay that debt or not. Nobody really does that. If Congress wants to reduce spending, or borrowing needs, it can totally do that. But it seems really irresponsible to incur debt and then play this type of game when it comes time to face up to the bill.