What’s Happening with the Federal Budget and Debt Ceiling?

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This piece first appeared on National Priorities’ blog.

After final vote were cast, members of Congress walk down the steps of the House of Representatives as they leave for a five-week recess, at the Capitol in Washington, Friday, Aug. 2, 2013. With few accomplishments in the divided 113th Congress, the next big battle is over the budget, the nation's debt limit and the possibility of at least a partial government shutdown. (AP Photo/J. Scott Applewhite)

You’ve heard whispers. Perhaps here and there in the news there’s been mention, yet again, of the potential for a government shutdown. So here’s the update you need – in handy cheat-sheet format – of what’s happening with the federal budget.

Patching Together a Federal Budget

Right around now lawmakers are supposed to finish their work on appropriations bills to fund the federal government – everything from environmental protection to higher education to the military – for the start of fiscal year 2014 on Oct. 1, 2013. But Congress hasn’t made much progress on that. In part that’s because lawmakers failed their responsibility of agreeing on a budget resolution – a blueprint for the overall budget – which would have ensured that the House and Senate were using the same set of numbers to write appropriations bills. Instead, the two chambers passed wildly different budget resolutions back in March (we have all the details here). Since then, the House has succeeded at passing four of the necessary 12 appropriations bills, while the Senate has passed zero.

If There’s No Budget

It’s overwhelmingly likely that when Oct. 1 rolls around lawmakers will, once again, fail their responsibility to pass a budget for this country and instead pass a temporary spending bill known as a Continuing Resolution (CR) to fund the government in the new fiscal year. If they fail even to pass a CR, the government will shut down – though so-called essential services would continue, meaning the government would continue to conduct food safety inspections and send Social Security checks.

If you think that’s bad, it gets worse.

The Debt Ceiling

Looming sometime after Labor Day is the promise of the federal government hitting the debt ceiling, which is the limit Congress places on its own borrowing. We’ve spent a lot of time here talking about the debt ceiling and how failing to raise the ceiling is akin to ordering a big meal at a fancy restaurant and then skipping out on the check. In other words, the time to negotiate over how much to spend is during the budget process, not when the bill comes due. Nevertheless, it looks like the debt ceiling will once again be a highly politicized event. According to The New York Times, Republicans in Congress have said they won’t raise the ceiling unless President Obama agrees to some combination of tax reform and changes to programs like Social Security and Medicare.

If Congress Fails to Raise the Debt Ceiling

A stalemate over the debt ceiling could lead to a government shutdown when the Treasury runs out of authority to borrow money – and, in that case, essential services would not necessarily continue. Social Security checks could stop. The federal government would default on its debt payments. And that could lead to problems throughout the global economy, including higher interest rates for you and me.

So, that’s the lay of the land with Congress now off for its five-week August vacation.

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Mattea Kramer is a senior research analyst at the National Priorities Project. She is lead author of the new book A People’s Guide to the Federal Budget.
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