Record $14 trillion-plus debt weighs on Congress
That means Congress soon will have to lift the legal debt limit to give the nearly maxed-out government an even higher credit limit or dramatically cut spending to stay within the current cap. Either way, a fight is ahead on Capitol Hill, inflamed by the passions of tea party activists and deficit hawks.
Already, both sides are blaming each other for an approaching economic train wreck as Washington wrestles over how to keep the government in business and avoid default on global financial obligations.
Bills increasing the debt limit are among the most unpopular to come before Congress, serving as pawns for decades in high-stakes bargaining games. Every time until now, the ending has been the same: We go to the brink before raising the ceiling.
All bets may be off, however, in this charged political environment, despite some signs the partisan rhetoric is softening after the Arizona shootings.
Treasury Secretary Timothy Geithner says failure to increase borrowing authority would be "a catastrophe," perhaps rivaling the financial meltdown of 2008-2009.
Congressional Republicans, flexing muscle after November's victories, say the election results show that people are weary of big government and deficit spending, and that it's time to draw the line against more borrowing.
Defeating a new debt limit increase has become a priority for the tea party movement and other small-government conservatives.
So far, the new GOP majority has proved accommodating. Republicans are moving to make good on their promise to cut $100 billion from domestic spending this year. They adopted a rules change by House Speaker John Boehner that should make it easier to block a debt-limit increase.
The national debt is the accumulation of years of deficit spending going back to the days of George Washington. The debt usually advances in times of war and retreats in peace.
Remarkably, nearly half of today's national debt was run up in just the past six years. It soared from $7.6 trillion in January 2005 as President George W. Bush began his second term to $10.6 trillion the day Obama was inaugurated and to $14.02 trillion now. The period has seen two major wars and the deepest economic downturn since the 1930s.
With a $1.7 trillion deficit in budget year 2010 alone, and the government on track to spend $1.3 trillion more this year than it takes in, annual budget deficits are adding roughly $4 billion a day to the national debt. Put another way, the government is borrowing 41 cents for every dollar it spends.
In a letter to Congress, Geithner said the current statutory debt ceiling of $14.3 trillion, set just last year, may be reached by the end of March — and hit no later than May 16. He warned that holding it hostage to skirmishes over spending could lead the country to default on its obligations, "an event that has no precedent in American history."
Debt-level brinkmanship doesn't wear a party label.
Here's what then-Sen. Barack Obama said on the Senate floor in 2006: "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 the government's reckless fiscal policies."
It was a blast by the freshman lawmaker against a Bush request to raise the debt limit to $8.96 trillion.
Bush won on a 52-48 party-line vote. Not a single Senate Democrat voted to raise the limit, opposition that's now complicating White House efforts to rally bipartisan support for a higher ceiling.
Democrats have use doomsday rhetoric about a looming government shutdown and comparing the U.S. plight to financial crises in Greece and Portugal. It's all a bit of a stretch.
"We can't do as the Gingrich crowd did a few years ago, close the government," said Senate Majority Leader Harry Reid, D-Nev., referring to government shutdowns in 1995 when Georgia Republican Newt Gingrich was House speaker.
But those shutdowns had nothing to do with the debt limit. They were caused by failure of Congress to appropriate funds to keep federal agencies running.
And there are many temporary ways around the debt limit.
Hitting it does not automatically mean a default on existing debt. It only stops the government from new borrowing, forcing it to rely on other ways to finance its activities.
In a 1995 debt-limit crisis, Treasury Secretary Robert Rubin borrowed $60 billion from federal pension funds to keep the government going. It wasn't popular, but it helped get the job done. A decade earlier, James Baker, President Ronald Reagan's treasury secretary, delayed payments to the Civil Service and Social Security trust funds and used other bookkeeping tricks to keep money in the federal till.
Baker and Rubin "found money in pockets no one knew existed before," said former congressional budget analyst Stanley Collender.
Collender, author of "Guide to the Federal Budget," cites a slew of other things the government can do to delay a crisis. They include leasing out government-owned properties, "the federal equivalent of renting out a room in your home," or slowing down payments to government contractors.
Now partner-director of Qorvis Communications, a Washington consulting firm, Collender said such stopgap measures buy the White House time to resist GOP pressure for concessions.
"My guess is they can go months after the debt ceiling is not raised and still be able to come up with the cash they need. But at some point, it will catch up," and raising the debt limit will become an imperative, he suggested.
Republican leaders seem to acknowledge as much, but first want to force big concessions. "Do I want to see this nation default? No. But I want to make sure we get substantial spending cuts and controls in exchange for raising the debt ceiling," said the chairman of the House Budget Committee, Rep. Paul Ryan, R-Wis.
Clearly, the tea party types in Congress will be given an up-and-down vote on raising the debt limit before any final deal is struck, even if the measure ultimately passes.
"At some point you run out of accounting gimmicks and resources. Eventually the government is going to have to start shutting down certain operations," said Mark Zandi, chief economist for Moody's Analytics.
"If we get into a heated, protracted debate over the debt ceiling, global investors are going to grow nervous, and start driving up interest rates. It will all become negatively self-re-enforcing," said Zandi. "No good will come of it."
The overall national debt rose above $14 trillion for the first time the last week in December. The part subject to the debt limit stood at $13.95 trillion on Friday and was expected to break above $14 trillion within days.