And here we are again, if not on a fiscal cliff, at least standing on a debt ceiling ledge.
When Congress agreed to reopen the federal government after October 2013's 16-day shut-down, it also suspended the debt ceiling until today, Feb. 7.
As we've all come to learn in the last few years, the debt ceiling is the limit on Uncle Sam's ability to borrow money to pay for bills he -- and by he, I mean Congress -- has already incurred, including, but not limited to Social Security and Medicare benefits, military salaries, tax refunds and yes, interest on the national debt itself.
Since the federal Treasury doesn't have enough cash on hand to pay all those bills, the country operates like most American families, taking out a loan.
Did you notice that reference to tax refunds? Sure you did since I bold-faced it. Not to be a tax blogging Chicken Little, but that's become a concern for some.
Not to be a tax tease, but more on that in a minute. First, a little debt ceiling background. (I had planned to be a teacher before I decided to go into journalism.)
Debt limit history: The United States' first statutory debt limit came via the Second Liberty Bond Act of 1917. It set limits on the aggregate amount of debt that could be accumulated through such debt instruments as bonds and bills.
In the 1930s, Congress moved towards aggregate constraints on federal borrowing that also allowed the Treasury more flexibility in financial management. In 1939, a general limit was placed on federal debt.
With World War II, the debt limit from 1941 to 1945 was raised to accommodate those accumulating costs, ultimately hitting $300 billion.
After 1954, the debt limit was reduced twice and increased seven times, until March 1962 when it again reached the $300 billion mark, according to the Congressional Research Service (CRS) in an October 2013 analysis of the situation.
And since March 1962, notes the CRS, Congress has enacted 77 separate measures that have altered the limit on federal debt.
The current debt is more than $17 trillion.
Political as well as fiscal fights: Most of the time, the debt ceiling has been increased without incident.
The most debt ceiling hikes came under Republican President Ronald Reagan's terms. Congress was OK with nearly doubling of the borrowing cap during GOP President George W. Bush's eight years in the White House.
Check out more U.S. debt ceiling charts and graphs as The Guardian's Datablog.
That's changed, however, since Democrat Barack Obama took office in 2009. Now the debt ceiling has become a political ploy and bargaining chip.
So what does today's debt ceiling deadline mean? Not much immediately.
The flexibility of the Treasury Department mentioned above means that it can take steps to delay the country's actual default for a short time. The first of those so-called extraordinary measures came at noon today, when Treasury stopped issuing securities to state and local governments.
Meanwhile, the political debt ceiling fight continues.
Some hard-liners in the Republican Party are committed to forcing the White House's hand. What they're also doing is causing problems for their ostensible leader. Bloomberg reports that House Speaker John Boehner (R-Ohio) is scrambling to find a way to get all his GOP colleagues to sign off on the increase.
Demands have ranged from Obama's approval of the Keystone XL pipeline (a perennial political pawn) to additional changes to the Affordable Care Act, aka Obamacare (the ever-present thorn in Republicans' sides). Those suggestions have gone nowhere within the ideologically fractured GOP.
"I think that we're still looking for the pieces to this puzzle," Boehner said at a news conference yesterday. "But look, we do not want to default on our debt, and we're not going to default on our debt. We're in discussions with members about how we can move ahead."
Those talks better speed up.
Extraordinary measures and refund worries: Treasury Secretary Jacob Lew has repeatedly warned that there is a limit (no pun intended by Mr. Lew or me) as to just how many extraordinary measures his office can take this time.
Meanwhile, as I noted in recent blog post over at Bankrate.com, some House Democrats are worried that tax refunds just now being processed could be threatened by the debt ceiling fight.
U.S. Rep. Sander Levin, D-Mich., the ranking Democrat on the tax-writing committee, and his 15 Democratic Ways and Means colleagues sent a letter to Boehner warning that
"Failure to act quickly will endanger our economic recovery and send a signal to American taxpayers that their refunds may be in jeopardy, potentially raising unnecessary panic among families awaiting their tax refunds (nearly 110 million refunds of $2,700, on average, last year)."
I suspect that Lew will find other ways to work around the debt ceiling and keep the refunds going out. A halt to tax checks is the last thing the Internal Revenue Service needs as it still is mired in Congressional investigations.
But who knows? If the debt ceiling is actually busted, halted tax refunds could be the least of our worries.
More tax talk: In addition to the debt ceiling's possible adverse effect on tax refunds, last week at my other tax blog I also looked at a Treasury Inspector General for Tax Administration (TIGTA) report that found the IRS is ready to handle its health care related tasks … as long as things don't change.
My additional tax thoughts are usually posted at Bankrate Taxes Blog on Tuesdays and Thursdays. If you happen to miss them when they go up at that personal finance website, you can always find a synopsis here on the ol' blog the following weekend … or earlier if I've got my act together that week!
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