GREENVILLE, N.C. - They are two words you hear a lot from the federal government these days: debt ceiling.
It's the maximum amount the United States is allowed to borrow. And, it's getting close to that limit. Congress has the power to raise it. We want to know what happens if it doesn't.
Think of the national debt as a credit card. The ceiling is the same as the credit limit. When we get in a pinch, we call the bank to increase it.
Democrats and republicans agree they need to raise the debt ceiling. They can't agree on the terms. If the government can't pay what it owes, millions of Americans could suffer.
Congress raised the debt ceiling 77 times since establishing one all the way back in 1917. Financial analysts say it's considered an automatic side effect of having an unbalanced budget.
"It hasn't been held hostage so much to the political game that gets played in Washington," said E.C.U. College of Business Interim Dean Stan Eakins.
Only now it is for the first time in history. So, if the government goes into default on the debt, Eakins says it would prioritize who gets paid. Military paychecks will likely top the list followed by countries like China that hold the actual debt. Those of you on Social Security, Medicare and unemployment could see that money cut drastically or stop altogether.
"You should be approaching panic mode," Eakins said.
Failing to raise the debt ceiling could set off a chain reaction. Credit agencies would likely determine the once safest investment in the world, U.S. Treasury Bills, is now risky. That would force the government to pay more interest on those bonds.
"We take a deficit that's already big and make it even bigger by a self-inflicted stab wound to the abdomen here," Eakins said.
Once those interest rates climb, all other rates would follow suit: credit cards, car loans and home mortgages. Eakins says development could stall if loans are harder to get.
"If there's any consensus that this is gonna go on for awhile, that this is gonna become a serious football, then Armageddon might not be too bad a term." Eakins said.
Because the rest of the world depends on the U.S. economy, Eakins says a global depression is possible if this goes on for a long period of time. He doesn't think that will happen and expects a deal will probably get done at the last minute. It's a game of political chicken. We're just waiting for someone to blink.
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