Democratic leaders in Congress are preparing to introduce a debt ceiling bill by the end of this week, with hopes of getting legislation passed before Aug. 2. If something is not passed, the United States risks sovereign default, or failure to pay back debts.

To put it in simpler terms, every time the United States borrows up to its limit in money from other countries, Congress has to raise the debt ceiling to allow the country to borrow more money in the future. This is a routine procedure.

“Most of the debt is in the form of money owed to other countries, along with the citizens that are invested in U.S. Treasury securities,” said Richard Mansbach, professor of political science.

If Congress fails to come to an agreement on how to raise the debt ceiling, it could result in a disastrous situation not only for the U.S. economy, but the world economy as well.

“Imagine us as the single most important banker in the world, and the single most important bank went bankrupt,” Mansbach said.

The Bush administration was in favor of reducing the debt, especially when it started getting out of hand. However, the administration reduced taxes and increased expenditures. The debt became worse, both at the end of the Bush administration and the beginning of the Obama administration, with the onset of global economic disaster.

“The problem now seems to be that although both political parties have come to a conclusion that debt has to be reduced, how [can government] do this?” Mansbach said.

Democrats feel strongly about tax increases as a way to get out of debt. Strongly conservative Republicans do not want to pass a bill that increases taxes.

If the debt ceiling isn’t raised, and the United States falls into default, anyone from our soldiers in Afghanistan to the elderly on Social Security would not receive money. Along with that, the value of the dollar would decrease dramatically and interest rates would rise.

In order to get out of this predicament, Congress has to raise the debt ceiling.

The problem is that President Obama believes that a portion of the deficit should be reduced using tax revenue. But every Republican opponent disagrees with this method. 

The economic downturn has brought small advantages to some. At Iowa State, program enrollment is at an all-time high, as it is at other colleges nationwide.

“During recessions, there [are] always a lot of people going back to [college] because they’re not finding suitable employment opportunities,” said Daniel Otto, professor of economics at Iowa State.

If the debt ceiling isn’t raised, Iowa State would be negatively affected. There would be a so-called domino effect. Money would stop going to universities, which means federal student loans would stop. Federal research done at labs by faculty would stop. As a publicly funded institution, Iowa State would suffer. In fact, funding to each state would be decreased, meaning less money would go to all universities and public schools.

“It’s a game. And it’s a game that’s leading towards 2012 — the presidential election. And it’s a very dangerous game,” Mansbach said. “The failure [to come to an agreement] would result in financial catastrophe.”