I’ve so far resisted really wading into the whole debt-ceiling charade because I am about as certain as can be that it will simply be lifted once again before any real damage is done to the US Treasury markets.
Sure, there will be a lot of posturing and huffing and puffing, and maybe even some last-minute tensions, but it will all be resolved as it always has been: with a hike in the debt ceiling that will last until after the next election.
But what if this is not true? What if this time an impasse occurs and the debt ceiling is not raised in time? Then what?
The Debt Ceiling
The debt ceiling is simply a cap set by Congress on the amount of debt that the government is allowed to carry. The cap only applies to debt held by the public and so-called “intragovernmental debt,” which is money that the government owes to the entitlement programs after having spent surplus funds from those accounts on other things.
Currently the debt ceiling stands at $14.294 trillion, which was officially hit on May 16, 2011. The government spends roughly $130 billion more than it takes in each month, and that difference must be made up by issuing more debt.
However, there are a number of tricks and wiggles that the Treasury can engage in before the ceiling is raised again (including the cessation of payments to federal retirement accounts and other sleights of hand) that are already eating into whatever new cap that may eventually be passed.
Political Kabuki Theatre
Unless Congress gets its act together and passes a debt-ceiling hike, the tricks and wiggles will run out of maneuvering room on or about August 2nd.
However, the political climate in Washington could hardly be worse for bipartisan cooperation on the matter, as Republicans see the issue as a ticket back into power.
DeMint Warns Republicans They May Be ‘Gone’ if They Support Debt Ceiling Increase
June 24, 2011
Conservative firebrand Sen. Jim DeMint has a message to fellow Republicans in Congress: If you support increasing the debt ceiling without first passing a balanced budget amendment and massive across-the-board spending cuts, you’re gone — destined to be swept out of Congress by a wave of voter anger.
by nate 
