(The Root) — The government is facing an economic catastrophe this week that could affect everything from mortgage interest rates to food stamps. If Congress doesn’t reach an agreement on raising the debt ceiling — the amount the country can borrow to pay its bills — the U.S. could begin to default on its loan obligations. The deadline is Thursday, and negotiations have made little progress.
The already deadlocked Congress is still at an impasse over the government shutdown, which is getting swallowed up in this new crisis. With one eye on how the stock market is reacting to a potential default, Democrats and Republicans are playing a game of brinksmanship waiting to see who will blink first on any concessions.
One bipartisan group in the Senate is working on a proposal that would end the shutdown and raise the debt-ceiling limit. The group, led by Sen. Susan Collins (R-Maine), says it is making some progress but points to ongoing discussions by the leadership. Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) are having conversations and will meet with President Barack Obama and Vice President Joe Biden Monday afternoon.
The Affordable Care Act, the original point of contention in the government shutdown, is still in Republicans’ sights, although they seem to have given up on defunding or repealing it, Politico reports. Instead, conservative lawmakers are hoping to edit some parts of the bill, such as bringing an end to health insurance subsidies for members of Congress, their staff and other federal employees. Another target of theirs is the medical-device tax. The Democrat-led Senate has already rejected both proposals, but with a new deadline face Congress, that resolve could falter.
A debt default is nearly unprecedented in the U.S. and would have disastrous consequences. The global markets anticipate chaos because the U.S. would be unable to pay its many worldwide creditors. Domestically, there could be a sudden spike in interest rates on credit cards and mortgages. If the stock market reacts negatively, that would affect 401(k) plans. With loan obligations and limited funds, the Obama administration would also face critical decisions on how to finance the government’s safety net programs, such as unemployment, food stamps and even Social Security.
The House has been flirting with a bill that gives the government a little more leeway by extending the borrowing limit for another six weeks, according to Politico. That may happen on Tuesday if nothing comes out of the Senate on Monday.
Whatever agreement lawmakers reach, they should do it soon. In 2011 Standard & Poor’s downgraded the nation’s credit rating for the first time, expressing disapproval of “political brinksmanship” in the U.S. government.