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Special Report

Understanding Debt Crisis

As President Obama enters the negotiations over extending the government borrowing authority -- that is, the debt ceiling -- there are some things that need to be understood.

The first is that there is almost no chance the government will default on its debt payments, even if the debt ceiling is never raised. That's because revenues will continue to flow into the treasury from income tax withholding, which will be more than enough to cover the debt payments. So the only way a default could occur would be if the treasury department inexplicably chose not to make the payments.

But there will come a time when there won't be enough money to fund all government departments and agencies, which would mean real disruptions. The administration will then get to decide which programs are funded and which are not, and will surely blame Republicans for any fallout. Democrats will also continue to accuse Republicans of wanting to lower taxes for rich people and more breaks for big oil companies.

In fact, Republicans are proposing no such thing. They want to leave the tax code alone. Democrats do not. They want to raise taxes in exchange for spending cuts as part of the debt limit deal. They won't say that, of course. They will say we need increased revenues. But everybody agrees on that. It's just that Republicans think increased revenues should come naturally from a growing economy. Democrats would like that, but they want to raise taxes too.