How debt limit could impact Americans

Economists have warned that failing to reach a deal regarding the debt ceiling could lead to a recession and have impacts on our lives.

The Biden administration outlined a roughly $6.8 trillion dollar budget.

That figure is really what’s being haggled over – to allow the U.S. to move forward with paying the money we’ve already spent.

Paying the government's bills -- that’s the easiest way to understand the debt ceiling debate or debacle. The debt limit caps outstanding federal debt. When we’ve spent more than that amount, $31.4 trillion, Congress has to allow us to spend more to pay back what we’ve already borrowed.

"When you’re talking about the debt ceiling, you're not talking about the allocation of money. You’re talking about basically paying bills that have already been incurred," said Michael Greiner, a former bankruptcy attorney and professor at Oakland University. 

It’s the wrangling over the budget that’s been the sticking point between the White House and House Republicans.

"This would be an unparalleled economic crisis in the United States history," Greiner said.

Biden has said negotiations are about the outlines of the budget, not about whether we're going to pay our debts, but no one can predict the future, so if we were to default, what's next?

"It would probably be payments to Medicare providers and Social Security, simply because those are big payments that need to be made on a regular basis. The biggest thing that the U.S. government is going to do is they're going to want to protect the credit of the U.S. and to do that they’re going to have to keep paying on the treasury bonds and everything is going to have to come behind that," Greiner said.

The treasury had a plan back in 2011, when debt default reared its ugly head before.

The minting of a trillion dollar coin and then depositing that into the treasury, so the fed could borrow against it is an idea that’s been discussed. Also, using the 14th Amendment to pay our debt has been considered. Neither idea is particularly popular.