Another Fight Over The Debt Ceiling Could Be Coming

The debt ceiling is set to expire this fall. If it's not raised, the U.S. government could default on its debt. That's never been a problem when one party controls Congress. Until this year.

LULU GARCIA-NAVARRO, HOST:

Besides health care, there are a lot of big things President Trump wants Congress to deal with like tax reform and infrastructure, but there is one thing it has to deal with - the debt ceiling. That's the limit on the money the government can borrow. If it's not raised, the United States could default on its debts. It's been such a thorny issue that it led to a government shutdown in 2013. Here to talk about all of this is NPR political reporter Danielle Kurtzleben. Good morning.

DANIELLE KURTZLEBEN, BYLINE: Hello.

GARCIA-NAVARRO: The Treasury Department is saying the country would hit the debt ceiling again in October. So why are we talking about this now?

KURTZLEBEN: Well, because you have Republican congressional leaders, as well as Steven Mnuchin. He is the treasury secretary, of course. They want to get this just out of the way, off their plates, before they go home for August recess. Now, that was delayed until mid-August. But it's not clear. Like you said, there's all this stuff they're working on like you may have noticed this week health care. They have a lot of stuff.

GARCIA-NAVARRO: That small thing, right?

KURTZLEBEN: Yeah, I know. So they're working on that. They're working on other things. So the question is, can they get it done by recess as well as all this other stuff they want to do?

GARCIA-NAVARRO: All right. So give us the short version of what the debt ceiling is.

KURTZLEBEN: OK. So the debt ceiling is a limit on what the U.S. can borrow. Right now, it's upwards of 19 trillion. And one way to think about the debt ceiling is that it's like a credit card limit. You know, you have a limit on your credit card - or at least I do - that says, you know, how much I can put on it. But I still have to pay for that stuff after I've done it.

So the government, even once it hits the debt ceiling, it still has to pay its bills. So this is not a limit on what the government can spend. It still has all of those obligations - contractors to pay, people to pay, you know, creditors and so on. It still has all of those obligations that it has to pay out. This doesn't limit spending, it limits borrowing.

GARCIA-NAVARRO: So why should people care about this, though? Why does this come up all the time?

KURTZLEBEN: It's become a political tool. And the reason it's a political tool is because the effects of blowing past the debt ceiling or our borrowing limit, they could be catastrophic. The thing is, we really don't know exactly what could happen, but there's reason to think it could be very bad. For example, the U.S. government is responsible for a lot of spending. If suddenly it had to pull back on that spending because it just couldn't send out all those checks to contractors, to workers, you know, it couldn't pay its creditors, that could be very bad.

GARCIA-NAVARRO: That could really, you know, tank the global economy.

KURTZLEBEN: Exactly. And not only that, U.S. debt is considered a phenomenally safe asset. If suddenly the safety of that is in question, that could really, really shake global financial markets. That is a big deal.

GARCIA-NAVARRO: That is a very big deal. So I think I'm right in this - we've got a Republican Congress, we've got a Republican president. I used to understand why this was an issue when you had a Democratic president and a Republican Congress...

KURTZLEBEN: Right.

GARCIA-NAVARRO: ...But everyone's of the same party, so why are we worried about this becoming an issue again?

KURTZLEBEN: One financial expert I spoke to said, you know what? It's not as scary now as it was back when you had, you know, split-party government. But this is still, like I said, a really big potential threat to the economy. One thing is that this does expose kind of fissures within the Republican Party. You have some Republicans who want what is called a clean debt ceiling increase - no strings attached, just increase it.

But the House Freedom Caucus, which is a group of conservative House members, they're saying, you know, we - A, we are willing to work through August, no recess, to get the debt ceiling raised. But also, we have financial reforms we want to do. We do want to cut spending, so we're going to attach it to this big important thing and use it as leverage to get what we want. And that's what happens in these fights. The debt ceiling is a big, scary thing that gets used as leverage.

GARCIA-NAVARRO: All right. NPR political reporter Danielle Kurtzleben, thank you so much.

KURTZLEBEN: Yeah. Thank you.

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