The fight over the debt ceiling could tank the US economy — and its reputation

The roof is on fire... Or is it the ceiling? There’s a battle between congressional Democrats and Republicans over raising the US Treasury's debt ceiling. A refresher: The Treasury is like Uncle Sam's money manager. It's responsible for handling all federal finances, including managing bills, borrowing, and taxes.

• The US gov't spends more than it collects in taxes, so it needs to constantly borrow to meet its financial obligations. Enter Treasury bonds.
• The Treasury borrows by issuing bonds and bills. Many countries, institutions, and individuals invest in these government IOUs.
• The debt ceiling is the max amount of $$$ that the Treasury can borrow. The US gov't has always paid back its debt to bondholders.
• The Treasury uses money raised from bonds to cover financial obligations. Think Social Security, Medicare, tax refunds, and military salaries.
• The US needs a higher ceiling to cover those expenses, plus trillions worth of Covid spending. The ceiling has been raised or suspended 78 times, but Congress can’t agree to move it.

The stakes... Dems want to suspend or raise the debt limit through legislation. Republicans say Democrats should raise the ceiling without GOP support, in a separate package. While lifting the ceiling doesn't authorize fresh spending, the GOP doesn't want to facilitate the Dems' $3.5T spending plan.

• If Congress doesn't act by October 18 the Treasury could run out of cash, the US could default on its debts, and operations that rely on gov't funding could slow or stop.
• Treasury Sec. Janet Yellen believes the issue will be addressed, but said failing to would result in “a historic financial crisis” and "millions of jobs lost.”