And they've spent past their limit. This has happened before and a mechanism has been put in place. Congress simply passes legislation that raises the debt limit. (You'd think the fact that they've passed bills authorizing all the spending would be enough, but when they hit a magic number, the president has to say 'pretty please' to be able to carry out all they've told him to do.)
If they don't do that, the US government's income won't be enough to cover all its debts. The government will have to sort through the bills coming due and decide which ones to pay and which ones to stall or skip altogether. Up until now, the US economy has been the most dependable and investors - individuals, corporations, and governments - have chosen the US economy as a safe place to invest. Because of the US's reliability, they've been able to sell bonds and other financial instruments at relatively low interest rates.
But if the US starts to default on some of its debts, then its credibility will go down. And its credit rating. A slow cascade of collapses is likely to happen. Government contractors who don't get paid, will stop paying their creditors and both will lay off employees. Those employees will spend less money and the places where they normally would spend money will run into trouble. The recession will get worse.
That's the scenario economists of all stripes have been painting. The Republican leadership has even said not raising the debt limit is unthinkable. A Wall Street Journal article said it threatened the US' special standing in the world even.
BUT, there are enough Republicans in the House who have decided that if it is so unthinkable, they can make demands on the President and he'll have no choice but to comply if he wants to raise the debt limit. So, instead of just passing the bill to increase the debt ceiling to equal the budgets they've passed, they've taken this vital piece of legislation hostage and have told the president that if he doesn't meet their demands, the debt ceiling increase is dead.
Sounds like a kidnapper or a hijacker to me.
Essentially, they are saying, if you don't meet our demands, we will let the air out of the American economy. We've got the debt limit increase hostage, and if you don't bow to our demands, we're killing it. We know it won't be pretty, they are saying, but the ends (apparently) justify the means. Yes, we know people will get hurt, but they'll get hurt worse in the long run if we don't reduce the national debt. The President agrees the debt needs to be lowered. But he understands that government spending, during an economic slump, is necessary until the economy revives. And he doesn't want to hurt people already hurting. So he wants to include taxes on the wealthiest Americans as part of the debt lowering strategy.
I've looked up terrorism and there's little agreement on a definition. It seems officials want definitions that paint their enemies as terrorists, but are careful that they won't fall into that category themselves, so they can't agree. While the House Republicans seem to be acting on their conservative ideology (one of the definitions of terrorists) one might argue that they aren't using violence to terrorize the population (another part of the most basic definitions of terrorism.) So, technically, we might not call them terrorists.
But if they cause an economic crisis that worsens the US economy, I'd argue that they will cause far more deaths (because of cutbacks in services at all levels) and damage than the terrorists who took down the World Trade Center. House Majority Leader Eric Cantor, for one, is willing to risk the standing of the US economy to get what he wants. Back in April:
[I went to the original source - Fox News - but could only find their transcript which was substantially the same, but either they garbled it, or they quoted Cantor verbatim. It seems the Huffington Post (above quote) captures it pretty accurately and more eloquently.]
It's common for politicians - and all those trying to wield power for whatever goals - to make their demands in the name of the people, rather than to say, it's simply what they themselves want. Cantor calls it a "leverage moment," and from a purely utilitarian perspective, it is. Other leverage moments include when someone has a gun at your head on a dark, empty street. Or when someone's kidnapped your spouse and now demands $200,000 in unmarked bills by Friday or else.
(While there are times when 'leverage points' might reasonably be taken advantage of, one that risks the US economy and the well being of people around the world, is not one of those. However, I would say that the Democrats need a modern day Tip O'Neil to help them work the rules of the House to counter this.)
I just don't see how this is different from blackmail. If you don't do what we want you to do, we're going to inflict severe damage on the economy. These are small minds at work. The way they solve problems is by force, by bullying. By tearing down, not by creating new options to work this out. These guys don't trust anyone who doesn't think like they do. Maybe, because, like most of us, they believe others think like they do, and they think: "Take no prisoners." There's a reason they are called "Young Guns." Subtlety and nuance doesn't seem part of their grey matter.
That's how I see it. Could I be wrong? It's happened before. If we default, will the world sigh a breath of relief knowing the Republicans are finally getting the US finances in order? I wouldn't bet on it.