From Capital Gains and Games

By Stan Collender — There is so much misinformation and grossly misleading talk about what will happen if the federal debt ceiling isn’t increased that, before any more unnecessary bloodcurdling language is used that increases everyone’s anxiety, it’s worth taking a few steps back from the edge.

First, not raising the current federal debt limit absolutely will not immediately shut down the federal government. In fact, the federal debt ceiling has virtually nothing to do with whether federal departments and agencies continue to operate. Borrowing is just one of the ways the federal government finances its activities, and not increasing the debt ceiling only eliminates one of them. The talk about the government being shut down if there’s no increase in the debt ceiling when the current level is reached in the next few months is either a gross misunderstanding of how the federal budget world works or a scare tactic. The first is merely unfortunate; the second is absolutely infuriating.

Government shutdowns occur when the appropriation that funds a department or agency isn’t enacted. In fact, unless the Treasury or the Office of Management and Budget informs them, federal departments and agencies likely have no idea about the government’s cash position or where the cash came from when they obligate funds and carry out the activities funded by their appropriation. The agencies and departments are legally required to conduct these activities; gathering the cash to pay for them is a completely separate process.

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