What is the US debt ceiling?
We explain 1:47
New York (CNN Business) -
An epic week in Washington is underway: Congress is grappling with budget reconciliation, an infrastructure plan, and a debt ceiling all at the same time.
The outcome remains uncertain, and America's prosperity and pockets are at stake.
"You want me to be honest? It's going to be a hell of a week," Michigan Rep. Debbie Dingell told CNN on Sunday.
Get ready for a jaw-dropping week of politics and process.
But this issue in Washington has implications for virtually every American family.
What is happening right now is nothing short of a kitchen table economy readjustment that occurs once in a generation.
Rebuild better
President Joe Biden and the Democrats want to remake the American economy from cradle to grave.
Investments for children, parents, workers, and the elderly would be paid for by the rich and big business.
The goal: reduce healthcare and childcare costs with universal preschool and two free years of community college.
Consumers in the US are more in debt than ever 0:55
There are paid maternity and sick leave, Obamacare grants, more Pell grants, and investments in climate resilience.
And for the elderly, Medicare would cover dental and eye care and hearing aids.
It's a huge $ 3.5 billion wish list in 10 years.
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Credit: Illustration by Justin Sullivan / Getty Images
Democrats hail it as the most significant expansion of the safety net since Lyndon B. Johnson's Great Society (LBJ) or Franklin D. Roosevelt's New Deal (FDR).
Republicans hate her for the same reason.
Republicans oppose raising taxes to pay for it and the scope of social spending.
And among Democrats there are some infighting over process and size.
"This political migraine has several weeks left as Republicans fight Democrats and Democrats fight other Democrats," says Greg Valliere, chief strategist at AGF Investments in the US.
Some Democrats in high-tax states insist on reinstating state and local tax deductions (SALTs).
And some progressives will object if moderate Democrats succeed in easing corporate tax increases or the size of the package.
Debt ceiling
Republicans are so opposed to the Democrats' social agenda that they promise not to help raise the debt ceiling. On CNN's State of the Union show, Senator Pat Toomey said Democrats are in the middle of "very damaging spending on a scale we've never seen, and they want us to go and authorize borrowing to help pay for it." He promised that the ceiling would have to be raised only by Democrats.
It's America's latest credit card limit political game.
If the debt ceiling is not raised, the Treasury Department cannot borrow money to pay the bills for what Congress has already spent.
At some point in the next month, the Treasury would have to choose which bills to pay, potentially giving Americans IOUs instead of Social Security checks, troop pay or child tax credit deposits.
Even a brief accidental default could trigger a financial crisis, cost the government billions more in borrowing costs, and potentially skyrocket interest rates for the rest of us.
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"Debt default is serious business," says Valliere, but Wall Street players are so far betting that the debt ceiling will be resolved.
"In the end it will rise and the Democrats will be forced to take most of the responsibility," says Valliere.
Infrastructure bill
But there is bipartisan support for a $ 1 billion infrastructure bill.
Again, these are investments that virtually every family would feel, in the roads they lead and the bridges they cross.
Think of better commute times, lower car maintenance costs, and even a possible reduction in food costs, as farmers now have to navigate creaking bridges and roads.
The administration believes that investments in the electricity grid, potable water, airports, seaports, high-speed Internet, public transportation, and electric vehicle charging stations are badly needed.
It's a simple intelligence test for Washington, with broad popular support, wrapped up in Washington's hellish week.
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