Debt limit fight could bring back shutdown specter

As Congress prepares for the next big round of budget battles, House Speaker John Boehner says he wants to see trillions of dollars in spending cuts as part of the legislation to increase the country’s debt limit, reports the Associated Press.

To avoid the first ever U.S. default on its obligations, Congress must raise the $14.29 trillion debt ceiling. A default would have far-reaching effects throughout the U.S. economy and impact global markets. And the clock is ticking: In a letter to Congress, Treasury Secretary Timothy Geithner stated the U.S. can continue borrowing until Aug. 2 due to stronger than expected tax receipts and extraordinary measures implemented by the Treasury Department.

Talk of a government shutdown has cooled since the 11th-hour solution reached in mid-April to fund the remainder of fiscal 2011, but the debt ceiling debate could reignite it. The last time the government shut down, in the mid 1990s, was because of a stalemate between a Republican-controlled House of Representatives and a Democratic president over the debt ceiling.

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