JUDY WOODRUFF: As Congress is in its final weeks in session for this year,
U.S. senators are deciding how they will vote on a deal to raise the debt ceiling,
after the House passed the first piece of the plan last night.
Leaders in both parties are projecting confidence, but the stakes are high.
Our Lisa Desjardins helps us understand why the debt limit has become so political,
and what exactly it does.
LISA DESJARDINS: The debt part is easy. The U.S. government is the largest spender in the world,
everything from the military and Social Security benefits to school lunches,
and even feeding animals at the National Zoo.
But the U.S. spends more money than it takes in, a lot more. For most of the past 100 years,
we have operated off red ink. All of that government spending, salaries, agencies,
weapons, parks and zoos, it's funded in good part by debt. The debt limit, or ceiling,
cuts off how much government can borrow at any time.
But U.S. spending is already in motion. Planes have been ordered, government jobs in place.
So, the debt ceiling doesn't mean our debt or bills will stop. It only
stops the U.S.' ability to borrow right now and pay for those bills.
Someone who's testified about our debt,
Maya MacGuineas of the Committee For a Responsible Federal Budget, explains.
MAYA MACGUINEAS, President, Committee for a Responsible Federal Budget: But the purpose
of the debt ceiling, I believe, is to make sure
that we aren't borrowing unlimited amounts, but, instead, we have a check, and we consider,
are we borrowing the right amount of money, and are we borrowing for the right things?
LISA DESJARDINS: When first introduced in 1917 under President Woodrow Wilson,
the overall U.S. debt limit then was set far above government spending needs. It left room.
But now the debt limit is routinely set at or near what we spend, so Congress,
both parties, has to lift the debt ceiling regularly, like in the agreement this week.
SEN. CHUCK SCHUMER (D-NY): We have cleared the path, hopefully, for addressing the debt limit.
LISA DESJARDINS: Or two years ago.
SEN. MITCH MCCONNELL (R-KY): We think it was the best possible deal under the circumstances.
LISA DESJARDINS: To address the debt ceiling, Congress has two options. They
can either raise the debt limit by setting a new dollar figure for total borrowing,
or they can suspend it by just punting the problem to a future date.
But what happens if the U.S. hits the debt limit and defaults, can't pay its bills? That's
never happened, so this is uncharted, but it's a likely financial disaster.
To help understand, think of U.S. government as the world's largest airport. Planes, like money,
come in, and planes go out. Think of borrowing as what powers the airport. Freeze the borrowing, and
that cuts main power to the airport, so most air traffic stops. Now, imagine this happened to every
U.S. airport. The travel or financial problems would ripple across the world in profound ways.
MAYA MACGUINEAS: That amount of uncertainty thrown into the economy, thrown into the country,
when we have never had it before, could easily push us back into a recession.
LISA DESJARDINS: The dollar and U.S. Treasury debt, bonds,
are a cornerstone of global trade. Money flies in and out constantly.
So, if the U.S. can't take on debt and can't pay its bills, it would affect interest rates
and stock markets around the world. And, here, it also could quickly affect things like mortgages,
car payments. Again, it is not clear, including to those in the business.
BRENDAN MCKAY, Independent Mortgage Broker: I put little faith in my ability
to predict what would happen in something like this, other than volatility.
And markets don't like volatility, so I know it would be incredibly negative.
LISA DESJARDINS: For government agencies, there would be some kind of a shutdown and
one worse than usual, because so-called mandatory programs, like Social Security,
usually protected in shutdowns, could see funding cut or frozen. The Treasury
Department would ration out where the nation's limited cash goes.
So, why hasn't Congress just raised the debt ceiling? For one,
we are at historic levels of red ink. Only World War II was higher. And for lawmakers,
there is both real concern and political maneuvering over that.
REP. BRENDAN BOYLE (D-PA): We always know the debt ceiling is ultimately going to be raised.
The question is, how much of a political game of chicken will we have to go through?
LISA DESJARDINS: The issue is this: We are in a time of gridlock,
close margins, sharp divide, and big spending.
The must-pass debt ceiling has become a piece of political leverage and policy
warfare. In other words, the debt limit, which was aimed at financial stability,
now threatens the opposite. And it largely serves as a mirror of our political instability.
For the "PBS NewsHour," I'm Lisa Desjardins.