For the past few weeks much of the television and print news has been focused on the standoff in Washington, D.C. over two separate issues: funding the government and raising the nation’s debt ceiling. Given the significance of these two issues and the widespread confusion surrounding them, we put together the following primer to help make sense of the current situation.
In a shutdown, Congress withholds from some federal agencies some of the monies they need to fund their operations. A default, on the other hand, prevents the Treasury from issuing notes to pay for the debt incurred as a result of government services already authorized by Congress. In 2011, we faced a shutdown in April and later a default in August. In both cases, the calamity was averted at the last second when parties came together. This year, however, we are already a week into a government shutdown and the potential for a debt default now looms as early as next week.