Questions About The Debt Ceiling

As the United States Government creeps ever closer to hitting our debt ceiling, there is a lot of information and misinformation available.  Unfortunately, even the people who are supposed to understand can find all the nuances confusing.  I’m going to answer the top questions that I’m receiving:

What Is The Debt Ceiling?

As you probably know, our federal government spends more than it earns each month.  As a result, the federal government borrows money each month to pay its bills.  Our laws are written in such a way that the government is limited in how much it can borrow.  The legal limit is called the debt ceiling.  Pretty regularly, the government runs into this borrowing limit and Congress has to vote to increase the limit.  Each time, various groups make demands in return for their vote to increase the debt ceiling.

The Pay Our Military Act (POMA)

Thankfully for all currently serving military members, Congress and the President passed the Pay Our Military Act on 30 September 2013 to protect military pay from interruption due to the lack of federal budget or continuing resolution.  However, this Act does not, and can not, protect military pay from delay due to lack of funds because we’ve hit our debt ceiling.

So, No Pay?

Lots of people are claiming that pays won’t be coming on 1 November 2013 if Congress doesn’t come to a debt ceiling agreement by 17 October 2013.  That isn’t right.

If Congress doesn’t come to a debt ceiling agreement by 17 October 2013, they will be moving into a situation where they don’t have enough money to pay their bills each day.  There are no laws or precedent for what will happen then.  Many people suggest that Congress, the President, or the Treasury Secretary can prioritize certain obligations.  There is no reason to believe that this is true.  Even if Congress, the President, or the Treasury Secretary could prioritize certain payments, there is no way to physically organize the payment of certain obligations.  The computer systems just aren’t programmed to do it, and there are too many payments to be handled without technology.

The most likely scenario involves paying the bills as the money becomes available.  For example, the Treasury might not have enough money to pay Monday’s bills on Monday, but it might have enough money by Tuesday.  This would result in a small delay which would grow if the situation were not resolves.  However, under this scenario, pay would still come even though the debt ceiling was not raised.  It just wouldn’t necessarily come on the usual dates.

I’m sure there are more questions – ask in the comments!


About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.