The government shutdown this week has made headlines this week—and provided fodder for late-night comedy.
After all, it seems shocking and a tad absurd that the government of the world’s largest economy is closed for business.
But behind the sound and the fury, a real, serious debate is happening—and it could affect not only your wallet but wallets the world over.
Here’s your cheat sheet to what Congress is squabbling over, what a debt ceiling is anyway, and what could happen if this issue isn’t resolved.
What Is This Shutdown Really About?
On the surface, it seems that this fight is about health care—specifically, U.S. President Barack Obama’s signature legislation, the Affordable Care Act, also known as Obamacare. Extreme-right Republicans in the House of Representatives want the president to defund or delay it; insurance exchanges for people without health insurance opened on October 1.
In order to secure their demand, they took a worthy hostage: funding for the U.S. government.
Basically, they are refusing to even give Congress the authority to keep spending money unless Obamacare is put on the back burner. Since the government fiscal year began on October 1, there was no more funding available as of that date. It is illegal for the government to spend taxpayer money without permission from Congress.
The health-care exchanges created by Obamacare opened on October 1 anyway, because the funding for them was previously approved, and so now everyone is turning their attention to the next crisis: the debt ceiling.
What Is a Debt Ceiling?
The crisis over the debt ceiling differs from the shutdown in one key respect. The U.S. government’s debt ceiling is a figure, set by Congress, that limits the amount that the U.S. government can borrow. If the government debt ceiling is not raised, the government will not have the legal authority to borrow money to pay its bills.
The government regularly spends more money than it raises in taxes and other revenue. It’s been that way for all but four years since 1970. This probably happens because Congress approves spending at a different time than it decides upon the debt limit.