Can a revamped U. S. Budget
avert the risk of the
nation sleepwalking to another debt disaster?

The federal budget and the debt ceiling – What would a gridlock lead to?

Have you heard whispers of the potential for yet another government shutdown? Perhaps here and there and in the news there has been mention of the need of the federal debt ceiling to be raised again. According to recent reports, it has been seen that the US government receipts, borrowings and expenditures indicate that the legally limited debt of the federal government has been $16 trillion for 100 consecutive days. The Daily Treasury Statement showed the status of the government's accounts as closed as they don't trade on weekends and the debt owed by the federal government didn't change on Saturday or Sunday. A statement released on August 23rd said that the federal debt that was subject to the legal limit set by Congress was $16,699,396,000,000, which was below the present limit of $16,699,421,000,000. During this period of 100 days from 17th May and 25th August, the limit on the debt simply didn't change

Rebuilding a federal budget – Can a revamped federal budget mend matters?

Presently, the lawmakers are supposed to compete their work on the appropriation bills to finance the federal government, starting from higher education to environmental protection to military for the start of 2014 fiscal year on 1st October, 2013. But the Congress hasn't made enough progress on this. This is because the lawmakers failed to agree on a budget resolution, which is a blueprint for the total budget, which would have made sure that the Senate and House were using the same numbers to write down the appropriation bills. Back in March, the two chambers passed different budget resolutions and since them the House has succeeded in passing 4 of the necessary 12 appropriation bills.

What if there's no budget?

It is most likely that when 1st October rolls around, the lawmakers will once again fail to fulfill their responsibility to pass a budget for the nation and instead of it, pass a temporary spending bill, known as Continuing Resolution to fund the government in the new fiscal year. And in case they fail to pass a CR, the government will certainly shut down, although the essential services would continue, meaning that the government would continue to send Social Security checks. 

The looming debt ceiling

Sometime after the Labor Day is the promise of the federal government to hit the debt ceiling, which is the limit which Congress places on federal borrowing. There have been lots of discussions about the debt ceiling and how failing to increase the debt ceiling is equivalent to ordering a huge meal at a fancy restaurant and skipping on the check. Thus, the time to negotiate on how much money to spend is appropriate during the budget process and not when the bill is due. It seems that the debt ceiling will once again be a highly politicized event. The Republicans in Congress has said that they won't raise the ceiling higher unless President Obama agrees to some kind of tax reform and alters programs like Medicare and Social Security. 

Well, a gridlock over the debt ceiling could lead to a shutdown of the  government where the Treasury runs out of funds. In such a situation the essential services would never continue and the Social Security checks would probably stop. This would lead to issues throughout the global economy, including hiked interest rates for the laymen.

Lorena is a financial writer. she has contributed many articles to numerous websites. She is associated with Oak View Law Group (Ovlg). It’s a law firm and dedicated to relieve the financial stress of peoples.