The choices they make now may have a large impact on our fragile economy's fledging recovery. Key decisions must be pragmatic and carefully considered. If a deal doesn't spread the burden fairly and evenly, the consequences could be almost as bad as missing the deadline and defaulting on our debt.
Compromises that extend the debt limit for the long-term must be as balanced as possible. A final deal must include a mechanism that allows for revenue-raising measures to be included down the road. A plan offered by a bipartisan group of senators known as the "Gang of Six" provides a good framework to do this. They close inefficient corporate tax loopholes to raise revenue.
That approach eases the burden on firms that now pay relatively more, especially small businesses. By doing this, business tax rates could be lowered to allow now-heavily taxed firms, including small businesses, to keep more of their profits in their pockets, helping them to expand, grow and thrive. Other measures being considered, such as curbing waste, fraud and abuse in Medicare and reforming the physician payment system, known as the "doc fix," will also help stabilize the deficit without harming small businesses or depressing consumer spending--a key concern for entrepreneurs.
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The information on this site does not modify any insurance policy terms in any way. Lawmakers on Capitol Hill are on the clock to increase how much money the federal government can borrow. For centuries, the U. The Treasury Department finances that extra spending by selling government securities.
To address the issue, Congress has to vote to raise or suspend the limit. But what makes this situation more dire is how close lawmakers are to running out of time — and how deeply divided they remain.
The U. This is going to be an eleventh-hour situation. Much worse could be another financial crisis. If the debt ceiling binds, the Treasury Department might decide to delay — or even temporarily halt — payments to millions of Americans and agencies.
That could be anything from Social Security checks, advance Child Tax Credit CTC monies, Medicare disbursements to health care providers, as well as payments to agencies, troops, state and local governments and contractors. The agency wanted to prioritize making interest payments and avoid default. Nearly 50 million seniors could stop receiving Social Security checks for a time. Troops could go unpaid. Millions of families who rely on the monthly child tax credit could see delays.
America, in short, would default on its obligations. Furthermore, reaching the debt ceiling would require that the president unilaterally cut spending or raise taxes to stay below the debt ceiling, despite the fact that spending and revenue levels are already authorized by law. The ceiling caps the total debt issued by the U. And of this amount, nearly half is held by Americans, either private domestic investors or state and local governments.
So how does it get scrapped? But according to Jack Balkin, a law professor at Yale Law School, President Obama actually has a few options , even in the absence of congressional cooperation.
Given that, these solutions are actually well-suited to the problem they would address. Working Economics Blog. Posted December 6, at am by Ethan Pollack. Please try again later. Financial Apps. Identity Theft. More from. Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances.
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