Senate leadership announced a bipartisan deal to reopen the government and avoid default on Wednesday — day 16 of the government shutdown and the eve of the debt ceiling deadline.
The deal isn't yet official as the U.S. House of Representatives still must vote on the Senate-approved plan, but a Democratic aide told Reuters that both parties are confident it will pass.
See also: 21 Reliable Sources to Follow on Twitter for Debt Ceiling News
What does this deal mean for the nation's economy, furloughed workers — and the Panda Cam?
The United States debt ceiling, also know as the debit limit, is the maximum amount of money the government may borrow. It's a legislative mechanism designed to cap the amount of debt the Treasury can issue.
Congress set its first debt ceiling in 1917 leading up to World War I. Prior to that, the government issued debt limits for specific purposes, such as building the Panama Canal, but a war with unknowable costs called for a general limit: $5 billion limit for all new bonds.
At the beginning of 2013, the limit was $16.394 trillion, but a 3-month suspension of the limit allowed it to climb to $16.699 trillion in May.
The U.S. actually reached the debt limit on May 19. Since then, the Treasury used "extraordinary measures," such as suspending some investments, to make sure it didn't surpass the limit. The Treasury estimated those measures would have been exhausted this week.
Wednesday's deal gives the U.S. borrowing authority until Feb. 7. Of course, that's also not a doomsday deadline — much like how the Treasury used alternative measures to avoid a default since May, they could use those extraordinary measures again if Congress fails to act next year.
Wednesday's deal also provides funding for all government operations through Jan. 15. There is no timeline, but with funding available, it's possible for workers to get back on the job, for national parks to reopen and for the National Zoo's Panda Cam to go live again.
In his remarks on the deal, Sen. Ted Cruz (R-Texas) — who made headlines for his 21-hour filibuster before a vote on a government spending bill which would defund Obamacare — said the plan does not affect the Affordable Care Act. ("Obamacare" and the Affordable Care Act are one in the same.)
Yes. Congress must act before Feb. 7 to avoid the possibility of defaulting again.
U.S. debt is issued when the revenue coming into the country isn't enough to pay for what we've purchased. Since the nation's income continues to be less than its spending, debt increases, and new debt ceilings are forever encroached upon.
You never hear about this happening in other developed nations because the vast majority of countries don't have debt ceilings.
Simply put, defaulting means that the government doesn't have money to pay its bills. Without the authority to borrow, some domestic payments could go unfunded, possibly affecting Social Security benefits, Medicare reimbursements and military pay.
Tony James, president and chief operating officer of the Blackstone Group, told CBS News that a default would be "Armageddon," predicting that the U.S. stock market would plummet.
The value of the dollar would likely decrease, and global markets could be impacted, especially ones with a large stake in the U.S. Treasury, such as China, which holds $1.28 trillion in securities.
In short, no. The money the U.S. owes is for items already purchased, so cuts to spending would not reduce anything.
In Wednesday's deal, Republicans got Democrats to agree to "have spending in one area of the budget decline for two years in a row," according to the Associated Press. However, that was just part of the larger negotiation to end the government shutdown and raise the debt ceiling and will serve as a means to curb future debt.
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