Understanding the Debt Limit Showdown

Email a Friend
The National Debt Clock. December 2, 2009
From and

Tune into CNN, and it's hard to miss the giant clock at the bottom of the screen keeping tabs on just how long the government shutdown will go, right down to the last second.

But just around the corner an even bigger national fiscal catastrophe is looming. In September the U.S. Treasury warned Congress that if the nation's debt limit is not raised by October 17th the U.S. will run out of cash to pay off its debts.

According to the Congressional Budget Office, the U.S. will have $30 billion of cash on hand come mid-October. On any given day, its net payments can reach as high as $60 billion. Meanwhile, the United States will hit its borrowing limit of $16.7 trillion on May 19.

Amid the back drop of the current government shutdown and the slowly recovering economy, many are concerned about the consequences of not increasing the debt limit for the first time in U.S. history. There is also a question of what impact this may have on an increasingly intertwined global economy, which is in it's own phase of financial recovery.

What exactly is a debt ceiling? And why will so much be at stake in this next political fight? James Surowiecki, a financial columnist for The New Yorker, joins The Takeaway to explain this latest chapter in Washington's political battleground.