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US Debt Default Over Obamacare Trainwreck

September 27, 2013


Republicans are threatening to plunge the American government into a disastrous debt default over Obamacare.

In a fiery speech, Obama said, “The Tea Party Republicans have taken it to a whole new level because they’re threatening to shut down the government or shut down the entire economy… unless I agree to gut a law that will help millions of people", says Obama.

Obama insists, “The Affordable Care Act is here to stay!”

A failure to raise the debt limit would mean the US government is unable to borrow money from the markets to fund its existing spending commitments. Such a move would trigger a debt default by the US with a potentially devastating outcome for a still fragile world economy.

The Republicans are willing to risk debt limit disaster to win concessions. They know that holding the nation's debt limit hostage in a standoff with Democrats over spending carries major risks to the economy, but they say they will do it anyway.

With the fight over funding the government still evolving, the GOP-led House fastened on a new showdown Thursday, announcing they will demand major concessions in spending in exchange for raising America's borrowing cap.

The debt limit, currently $16.7 trillion, is the maximum amount that Congress has authorized the Treasury Department to borrow in order to pay for the spending that Congress has authorized. Treasury Secretary Jack Lew warned recently that the limit will be reached on Oct. 17, leaving the federal government unable to pay all of its bills and risking a default.

When Congress allowed the government to reach that point for several months in 2011, it sparked a 2,000-point stock market slide and a downgrade of the United States' credit rating. Economists warn that if the limit is reached again, the consequences will be exponentially worse.

If the U.S. government doesn't reduce its spending, it will face bankruptcy. Economists have warned that showdowns over raising the debt limit and funding the government are likely to worsen the annual deficit. The debt limit does not work like a credit card, whose limit must be boosted to make new purchases.

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