-You've probably heard about the fight over the debt ceiling.
-There's still no deal on the debt ceiling.
-Economic experts warn there
would be dire financial consequences,
-$31 trillion before a June 1st deadline.
-And you might remember government shutdowns.
-Well, Congress is in,
unfortunately, a familiar position
as it works to avoid another government shutdown.
-The countdown is on this morning for lawmakers
to come to an agreement on a government
funding package before Friday's deadline.
-But a default on the national debt
and a government shutdown aren't the same thing.
Here's how the two scenarios are different.
-The big difference with going over the debt ceiling
is the government literally does not have
the cash to pay the bills, any bills,
not just the part that's annually appropriated,
but Social Security benefits, Medicare benefits,
veterans' benefits, and interest on the substantial federal debt.
-America has actually never experienced a default before.
That's why it's always such a big deal.
Members of Congress, as much as they may try
to politicize lifting the debt ceiling,
it really has never gotten to the point of default
because the consequences would be immense.
-To understand what causes a government shutdown,
first you have to understand appropriations.
Appropriation bills provide the financial resources
necessary for the government
to carry out its various functions and services.
When the government's appropriations bill expires
and Congress has not passed a new budget,
a shutdown is triggered.
-So that is something that is really felt immediately in D.C.,
in capital cities.
But it takes some time for the American public to feel it.
The only way the public really feels it is
if they have plans to go to a national park.
They wouldn't be able to do that.
You'll see trash being piled up in public parks.
They also may not receive mail
if it really goes on for a very long time.
There are economic consequences to a government shutdown,
but usually the government opens back up at some point
and you can remake all of those losses over time.
-The debt ceiling is a bit different.
Congress may agree to spend more in special circumstances,
like in the midst of a war, recession, or global pandemic.
When the government spends more than what it earns,
a deficit occurs.
Because tax revenue alone can't pay for the deficit,
the Department of Treasury sells bonds to make up the difference,
paying interest to those who buy the bonds.
The debt ceiling is a cap by Congress
on the value of those bonds,
or how much the government can borrow to pay
for what Congress has already approved.
The Department of Treasury has already reached the current
debt limit of $31.4 trillion in January of this year,
but has taken what they call extraordinary measures
to avoid default.
They warned if an agreement can't be made by early June,
the government will run out of money.
-We still estimate the Treasury will likely
no longer be able
to satisfy all of the government's obligations
if Congress has not acted to address the debt limit
by early June.
-If we reach what's known as the X date,
the day where the Treasury doesn't have enough money
in its checking account to pay every bill
that comes in that day,
somebody is not going to get paid.
It might be the people who own government bonds,
it might be federal employees, it might be people
who are expecting a Social Security check.
-U.S. Treasury bonds are often used as a benchmark
for other interest rates and financial instruments,
such as mortgages and corporate bonds,
because they're backed by the full faith
and credit of the U.S. government.
If the interest payments on those bonds aren't paid,
potential repercussions include a downgrade
of the United States credit rating,
increased borrowing costs for businesses and homeowners alike,
and a drop off in consumer confidence
that could shock the U.S. financial market
and tip the economy into recession.
-We have been able to, in effect,
live beyond our means, to spend money that we had to borrow,
only because a lot of people, some in the United States,
some big insurance companies, some mutual funds,
but a lot overseas, have been willing to lend us the money,
and they're willing to lend us the money
because they think that if you have money to park somewhere,
the absolute safest place to put it is in a U.S. Treasury bond.
If we don't raise the debt ceiling,
if one person doesn't get their interest on time,
we will lose that reputation forever.
-Even though the debt ceiling has been raised
78 times since 1960,
as politics become more polarized,
the debt ceiling negotiations have been used
as a bargaining chip for Democrats and Republicans
to advance other agenda items.
-When one side starts to think the other guy
is winning the messaging war,
that's when somebody's going to blink.
The hope is that that'll happen
before we get to the point of crisis.
But it often -- even when we do this,
it often ends up happening at the very last minute.