debt ceiling talksThe U.S. is again closing in on its national debt limit, and if a recent statement by Republican Speaker of the House John Boehner is any indication, another fight with the Obama administration over the issue of raising it might be brewing.

Another debt-ceiling cage match is the last thing the American economy needs right now. Remember what happened during last summer's battle? It was ugly. But we may not be able to avoid it this time around, so here's a preview of what we might expect.

Brother, Can You Spare a Trillion?

All of us have credit limits that determine how much money we can safely borrow to pay our bills. The federal government's credit limit -- or "debt ceiling" -- has a few more zeroes than ours. It currently stands at $16.4 trillion. And unlike those of us who have learned to live within our means, Uncle Sam spends a lot more money than he takes in.

To raise the debt ceiling, both houses of Congress and the president must agree to do it. In the past, that's never been an issue. In fact, the debt ceiling has been raised 74 times since 1962 -- 10 times since 2001 alone.

But last summer, something that had been little more than a formality exploded into a showdown between the Republican-controlled House of Representatives and the Obama administration that brought the U.S. to within hours of defaulting on its debts.

In the end, an agreement was reached, and the country did not default. But as a result of the high-stakes, high-publicity showdown, the U.S. -- for the first time in its history -- lost its AAA credit rating, the highest rating credit agencies can bestow on sovereign or corporate debt.

Our Credit Rating Conundrum

Credit ratings count, because they help determine the interest rate at which the country can borrow. Right now, 10-year Treasuries -- the benchmark U.S. Treasury bond -- are yielding about 1.7%, which is wonderful. It means we only have to pay investors a measly 1.7% or so to buy our debt -- that's cheap. Right now, Spain and Italy are paying investors about 6% for loans.

The rate at which the country can borrow also determines the rate at which consumers and businesses can borrow. As Treasury yields rise, other interest rates go up with them. Higher interest rates mean everything costs more, which could negatively impact our very tentative economic recovery.

Oddly, when the U.S. took its credit rating hit last year, rather than investors fleeing our now "risky" debt and seeking safer havens, just the opposite happened. Investors flocked into Treasuries, which drove yields to record lows. But if we have another public standoff, and our credit rating drops even more, there's no guarantee that weird bolt of lightning will strike again.



Can't We All Just Get Along?

The U.S. is due to hit its debt limit in early 2013, which means Congress and the president will have to agree to raise it once again or let the country face default. A week ago, Boehner said the only way the House would agree to raise the debt limit was if an equal amount of spending cuts was also agreed to.

So, are we headed for a 2013 debt-ceiling showdown? Not necessarily. A lot of things might change by then. Mitt Romney might be in the White House, for one, which would still leave a Democratic-controlled Senate to potentially fight House Republicans on the debt -- unless the Senate switches hands, too. Alternately, Democrats might retain the White House, regain the House, and keep the Senate. Either of these last two scenarios would likely preclude a debt-ceiling fight.

However the politics work out, it would be good to avoid what happened last summer. The fight over raising the debt ceiling went on for so long and with such histrionics on both sides that, to the rest of the world, America looked like a country that couldn't get its act together.

It's not like we were Greece. We could easily make the payments on our debts; we were just choosing not to.


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democracks0

Yesterday was Somey's turn to post. The day before it was Mily's turn. Today is Chris's turn. LMAO

What a trio of Obamites.

May 24 2012 at 2:20 PM Report abuse +3 rate up rate down Reply
chris1011

Slowest spending in decades:

Reagan '82 - 85 ....8.7%
Reagan '86 - 89 .... 4.9%
Bush1 '90 - 93 .... 5.4%
Clinton '94 - 97 .... 3.2%
Clinton '98 - 01 .... 3.9%
Bush2 '02 - 05 .... 7.3%
Bush2 '06 - 09 .... 8.1%
Obama '10 - 13 .... 1.4%

May 24 2012 at 12:17 PM Report abuse -4 rate up rate down Reply
1 reply to chris1011's comment
chris1011

And that was from the Wall Street Journal article, the bastion of conservative capitalism. Facts, not fiction.

May 24 2012 at 12:18 PM Report abuse -5 rate up rate down Reply
2 replies to chris1011's comment
democracks0

LMAO. Chis is still on here auditioning for a spot on MSNBC.

Right now Chris is off somewhere looking for a dictionary so he can look up the word "fact".
Maybe he can ask his kindergarten teacher to define the word for him.

May 24 2012 at 2:16 PM Report abuse +1 rate up rate down
democracks0

*Chris

May 24 2012 at 2:21 PM Report abuse +1 rate up rate down
chris1011

Over Obama’s four budget years, federal spending is on track to rise from $3.52 trillion to $3.58 trillion, an annualized increase of just 0.4%.

There has been no huge increase in spending under the current president, despite what you hear.

Why do people think Obama has spent like a drunken sailor? It’s in part because of a fundamental misunderstanding of the federal budget.

May 24 2012 at 12:12 PM Report abuse -2 rate up rate down Reply
2 replies to chris1011's comment
chris1011

Almost everyone believes that Obama has presided over a massive increase in federal spending, an “inferno” of spending that threatens our jobs, our businesses and our children’s future. Even Democrats seem to think it’s true.

Government spending under Obama, including his signature stimulus bill, is rising at a 1.4% annualized pace — slower than at any time in nearly 60 years.
But it didn’t happen. Although there was a big stimulus bill under Obama, federal spending is rising at the slowest pace since Dwight Eisenhower brought the Korean War to an end in the 1950s.

Even hapless Herbert Hoover managed to increase spending more than Obama has.

Here are the facts, according to the official government statistics:

•In the 2009 fiscal year — the last of George W. Bush’s presidency — federal spending rose by 17.9% from $2.98 trillion to $3.52 trillion.

•In fiscal 2010 — the first budget under Obama — spending fell 1.8% to $3.46 trillion.

•In fiscal 2011, spending rose 4.3% to $3.60 trillion.

•In fiscal 2012, spending is set to rise 0.7% to $3.63 trillion, according to the Congressional Budget Office’s estimate of the budget that was agreed to last August.

•Finally in fiscal 2013 — the final budget of Obama’s term — spending is scheduled to fall 1.3% to $3.58 trillion.

May 24 2012 at 12:12 PM Report abuse -4 rate up rate down Reply
democracks0

The copy and paste poster child strikes again. Ask Arianna to give you some new material.

Obamas a fiasco

May 24 2012 at 2:17 PM Report abuse +3 rate up rate down Reply
chris1011

A MarketWatch story in the Wall Street Journal (http://www.marketwatch.com/story/obama-spending-binge-never-happened-2012-05-22) says "the biggest whopper" being told about Obama is that he has been on a reckless spending spree since taking office. The Tuesday article, titled "Obama Spending Binge Never Happened," says it is patently false to claim that Obama has presided over a massive increase in federal spending. To the contrary, the article says, the reality is that spending is rising at its slowest pace since President Dwight Eisenhower brought the Korean War to an end in the 1950s.

That means that the rate of federal spending increase is lower under President Obama than all of his predecessors since Dwight Eisenhower, including all of his Republican predecessors. That is a fact not often noted in the press and certainly never mentioned by the Republicans. It is simply a fact that despite the enormous challenges that this country faced when the president took office this president has demonstrated significant fiscal restraint.

Obama stimulus was the biggest middle class tax cut in US history. Bulk of that stimulus was Tax breaks for the middle class. The rest went to keep teachers, firefighters and police in States in their jobs. TX balanced their entire 2010 budget with 6.4B in Stimulus money. There were 2 parts to the Obama stimulus.
The first part according to a recent CBO report created/saved 3.3 million jobs. The second part was one of the largest tax cuts in history, $300 billion.

Nothing is more amusing than seeing conservatives BASH the Obama stimulus and the huge tax cut it contained. I mean, HOLY GROVER NORQUIST (!) When was the last time you saw conservatives BASH a huge tax cut? It proved that, as far as conservatives are concerned, a blackman in the White House can trump a huge tax cut.

Budget Conservatives, stop pretending that Fiscal Year 2009 belongs to Obama. The fiscal year starts in October. Fiscal Year 2012 started last October. Bush's last budget had total spending of 3.517 trillion, it was fiscal year 2009. This spending was approved before Obama took office.

May 24 2012 at 12:08 PM Report abuse -4 rate up rate down Reply
1 reply to chris1011's comment
democracks0

Chris is a true blue Obamite and Ariannas copy and paste poster child.

The only response needed to Chris's comment is

Obamas a disaster!

May 24 2012 at 2:19 PM Report abuse +2 rate up rate down Reply
tj1108

The President will want to keep the same policies in place even though we have had another 6 months to see that they are not working, only making things worse. You would think Boehner is in a better position now to cut the size of Govt, but the left wing media's propaganda keeps propping Obama up. At some point Obama and the left wing media will be the only ones left that agree with his policies.

May 24 2012 at 11:28 AM Report abuse +2 rate up rate down Reply
BUFFALO

This is a pure lack of leadership by the president and political gamesmenship by harry reid.
The cure for this issue is a simple one and all that needs to be done is to pass a budget once a year.Thats something this president and the majority leader have yet to do in the last four budget cycles.

May 24 2012 at 10:28 AM Report abuse +5 rate up rate down Reply
COMMON SENSE

To say the government is spending our money like there’s no tomorrow is a monumental understatement. But the president rarely talks about his mounting debts, hoping the voters will forget that side of the fiscal equation when they vote in November.

This is just plain ridiculous! Take a few minutes and try to apply this thinking to your personal life. The more money you spend, the deeper you get in debt. You can apply for a credit card & then pay your bills, this will give you a temporary band aid & stop the collection calls, but what happens next month. It simply does not work

Obama is clearly shown to be out of control and out of touch with reality; you cannot keep living past your means w/o eventually having to pay. Obama and the Liberals are dealing with false reality:
Spend ever more
Tax everyone more
Crushing regulations
More massive Government

May 24 2012 at 9:59 AM Report abuse +4 rate up rate down Reply
octanehi5

How about if we defalt, and don't pay any retired or standing people in the government no heathcare or pensions.then we would not have the money to pay the military they have to all come home. No money to send to other countries That may not be a bad thing. Put are troups on our borders no one gets in. All government officials can then be taken out of office for not up holding the constitution and China can hold there hand on there A__ And we can start over as we the people again, we are about 300 million strong We let these morons run our government Yes I said ours. Its time to change this country in the right direction for what it stands for not the profit of these politicions. yes we need real leaders in the right direction.We have to get or leaders out of each others pockets. If they take money from big companies for what ever reason thats Bribery you go to jail for that.Its about we the people And Made in America .All of or standing or sitting political people are a joke and need to be replaced. I can go on but I'm running out of space

May 24 2012 at 8:58 AM Report abuse -1 rate up rate down Reply
rrfotobus

And, Boehner along with his brain dead House Republicans are looking to lower the USA credit rating again with their irrational and never seen before behavior over this issue. The GOP care little about America; they are only interested in the rich and their own party. If the GOP take over control of the government in the next election you will see America fail horribly.

May 24 2012 at 8:24 AM Report abuse -6 rate up rate down Reply
1 reply to rrfotobus's comment
cpo1514

Too bad Reid wont vote on a real budget. This man has the Socialist disease like Obama.. Now the Libs are running out of 'other peoples money". Perhaps the voters will finally say F EM ALL. Think no mo green!

May 24 2012 at 9:37 AM Report abuse +5 rate up rate down Reply
crystalball2114

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better." 2006 Speech on the Senate Floor by then-Sen. Barak Obama

Hypocrisy at its highest.

May 24 2012 at 7:32 AM Report abuse +4 rate up rate down Reply
1 reply to crystalball2114's comment
tj1108

The name of the Demacrat party should be changed to the Hypocrisy party.

May 24 2012 at 2:07 PM Report abuse rate up rate down Reply