U.S. hits its debt ceiling limit

All right another major story we're following for you right now and something we've really been mourning about all week the U.S treasury Department announces the U.S has hit its debt ceiling that's right the announcement means that the country has reached its borrowing limit and is now in danger of defaulting possibly as soon.

As June the U.S treasury has already begun implementing what they're calling Extraordinary Measures to try and prevent that from happening but some members of Congress and the White House are in a standoff over the next steps some House Republicans are calling for budget cuts before voting to increase the debt limit Democrats claim that that.

Delay could lead to a fiscal crisis now stock markets this morning fell in anticipation of this announcement and they've not really made much ground through the morning CBS News Congressional correspondent Scott McFarland joins us now to speak about what all of this means Scott let's just start at the top we've been using this.

Phrase but break it down for some of our viewers what are the Extraordinary Measures um the U.S treasury is taking to prevent default and how does that really function yeah some bookkeeping shifts Errol they're going to start payments on some of the retirement pension accounts things that would affect retirees down.

The road also stop the reinvestment of some security Investments the federal government makes none of that has any short-term impact and the treasury Department says it'll make good on this when the crisis ends but it buys Congress some time it gives them a few more months to raise the debt ceiling it's.

31.4 trillion dollars roughly now but the federal government has to keep borrowing to pay for the expenses it's already incurred it's not future spending it's handling previous spending today is the day it hits the limit the 31.4 trillion which puts the pressure on Congress to figure out how to get this done at this moment in time Errol and.

Lana they don't seem to be any real meaningful conversations it's just two sides talking past each other yeah so on that point uh Scott I think that it's important what you're saying because raising the debt ceiling previously had been a non-political matter in part because as you say this this is money that Congress has already spent and now.

Owes and if it appears that Congress may not pay its bills well then there's a very real impact on the credit of the U.S which has an impact on all of us so given that does it look like either sign is is willing to either on the president's side willing to open up talks or the Republicans side willing to say we're going to raise it this time.

But let's have other conversations about about how we handle spending yeah the debt ceiling is frequently raised but it's rarely such an issue because there's an acknowledgment a sense that it's nitroglycerin you mess with that all kinds of economic explosions can incur so what we saw in 2011 was really our best case study of.

What we could face now in 2011 when the political makeup was exactly the same Democrat in the White House Democrats controlling the Senate but a new emerging house Republican majority taking part in the U.S house we saw a near breach and the ramifications were severe of even a near breach the U.S credit rating was lowered the stock.

Market took a huge hit just with the flirtation with breaching the debt ceiling that's the prospect America faces again with the same political reality the same players in each of the three main roles and the prospect we could be flirting with another debt ceiling breach the estimate now is maybe May or June for the ultimate of it cut.

Off now that the treasury Department has enacted its emergency measures but again neither side has acknowledged any meaningful talks of how to avert disaster so then Scott you mentioned similarities politically to 2011 one of the big differences a variable that's changed this time is there's some a new house rules package that could have an.

Effect on how long it takes now for new terms on a deal how might that mix things up the first real world impact of that historic standoff we saw earlier this month over the vote for U.S House speaker you'll recall there was this faction in the house Republican conference that denied Kevin McCarthy.

The speakership on the first 14 votes are reporting part of the negotiations and the discussions to get it to the 15th vote was some type of stance or position on the debt ceiling a sense that they want to exact some concessions some spending cuts before approving a debt ceiling increase very similar to what happened in 2011 when Republicans.

Said they want to see some spending cuts or controls before raising the debt ceiling but Democrats have responded and will continue to respond they are conflating two different issues here the debt ceilings about previous spending not future spending and that's why the White House says it will not negotiate over this if you negotiate over the debt.

Ceiling this time you set a precedent to do so in the future which will raise the risk of future economic calamity yeah it's a head scratcher because everyone understands the importance of negotiating and only allocating funds for what you can afford but let's not put the value of U.S credit on the line in the meantime well it's kind of like.

Your credit card bills like if you don't want like if you're if you're fighting over what credit card bills to spend but the bill is due if you don't pay that you're going to have a ding on your credit rating and that is going to cost you more in the long term Scott McFarland we appreciate you explaining it all for us thank you very much thanks.

Scott thank you

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