Another U.S. Debt Ceiling Deadline

Military Officers Association (MOAA): On Mar. 6, Secretary of the Treasury Jacob Lew told Congress that the United States hits its debt ceiling on Mar. 16. Failure to raise the debt ceiling means the government will not be able to pay what it owes.

Without raising the debt limit, the treasury department will need to impose “extraordinary measures” to meet federal obligations. These obligations include military pay, VA compensation, Social Security, Medicare payments, and tax refunds.

While the government can use extraordinary measures to shift money between accounts for a while, according to the Congressional Budget Office (CBO), funding will expire sometime in October or November.

That time frame sets up a potentially toxic mix of fiscal issues for lawmakers, since FY 2016 spending bills are also due on Oct. 1.

The debt ceiling is a unique feature in American governance. Few other countries explicitly separate funding and borrowing authority.

Under the current system, Congress passes legislation to fund programs or initiatives without always finding ways to pay for them. Once signed by the president, there is a legal obligation to pay for the new measures. However, since the government has to pay out more than it takes in through tax revenue, it has to ask the treasury department to take on debt to meet its payments.

It’s important to note that raising the debt limit does not permit new spending, but rather, allows the government to pay what it’s already agreed to do.

The debt ceiling was designed to promote fiscal discipline, and make Congress use its constitutional powers to effectively control spending.

To reduce the debt, Congress will need to find a solution that either reduces government spending, increases revenue through taxes, or some combination of the two.

In 2011, political posturing on raising the debt ceiling caused Standard & Poor’s to downgrade the United States’ credit rating for the first time in history.

Immediately after the credit rating of the U.S. declined in 2011, the stock market declined between 5 and 7 percent.

MOAA calls on Congress not to make the same mistake and jeopardize the nation’s credit rating by waiting until the last minute to find a solution.
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MOAA is the nation's largest and most influential association of military officers. It is an independent, nonprofit, politically nonpartisan organization.

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