Debt Ceiling

After more than six months of partisan bickering, Washington leaders managed to avert default by stealing a page from the Reagan era.   The 74 page bill approved by Congress revives and amends Gramm-Rudman, the marquis deficit reducing legislation of the 1980’s.  The full impact of the deal won’t be known until Congress translates the loose spending targets in the legislation into specific program cuts through the annual appropriations process, but it is clear that federal funding for states is set to drop precipitously. 

With the clock ticking and rating agencies waiting to pounce, Washington remains locked in the grips of the debt ceiling saga. This typically minor agenda item has taken the forefront and brought all other legislation to a halt. Not only are the terms of the debt ceiling vote being followed closely by political insiders and outsiders alike, but the doomsday scenarios that could result from inaction also are being explored, analyzed and planned for. If last-minute negotiations fail, what will the implications be for states?

As Washington continues negotiations over raising the debt ceiling, state leaders are bracing for the worst and hoping for the best. If the federal government doesn’t find a clear debt ceiling solution by the August 2 deadline, states could face higher borrowing costs, risks to their investments and an abrupt stop to federal funding for key programs.

With the debt ceiling negotiations stalled, and the August 2 deadline looming, the White House convened a conference call on Wednesday, June 13 to lay out the President's position and explore the impact of the impasse on states.  The call, hosted by the White House Office of Intergovernmental Affairs, featured a discussion led by David Kamin, Special Assistant to the President for Economic Policy.