US Debt Ceiling Crisis: A Listicle Guide To Why Washington Came So Close To Financial Catastrophe

A Simple Guide To Why Washington Came So Close To Financial Crisis
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After 16 days of shutdown and having come within a day of breaching the debt ceiling, Republicans and Democrats reached a deal to reopen the US government and avoid default.

On Wednesday, Democratic leader Harry Reid said that Senate leaders had found agreement, with non-essential government services to reopened - but only until a new deadline of January 15. America's borrowing authority will be increased until February 7.

Reid said: "The compromise we reached will provide our economy with the stability it desperately needs."

Yet to outside observers, the past three weeks may have been somewhat baffling – a perplexing cocktail of Tea Partiers, Ted Cruz, Obamacare, furloughed workers and debt.

Here is a simple listicle guide to how and why Washington came so close to pushing the world back into financial chaos.

Why The US Is Close To Default
THE DEBT DEFAULT(01 of11)
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The US government nearly defaulted on its debt because the two parties - the Republicans and the Democrats - struggled to reach a deal to increase the country's debt limit. (credit:Getty Images)
WHAT DOES THAT MEAN?(02 of11)
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The debt limit represents the total value of government borrowing. The limit is set by Congress and is usually issued in the form of treasury bonds and securities. If the debt limit isn’t increased, the US can’t honour its debts to foreign countries. (credit:Getty Images)
WHY IS THAT BAD?(03 of11)
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The US dollar is the world’s reserve currency. If the US can’t pay its debts, the stock markets would likely react badly, plunging the US and the world back into recession. (credit:Getty Images)
WHY DIDN'T THEY JUST RAISE IT?(04 of11)
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A deal was so difficult to reach because the Republican speaker of the House of Representatives, John Boehner, faced huge pressure from within his own party not to compromise with the Democrats. (credit:Getty Images)
WHAT DID THIS HAVE TO DO WITH OBAMACARE?(05 of11)
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The Affordable Care Act, which was passed into law in 2010, is despised by the Republican Party, who see it as a violation of free market principles and an expansion of statism. It’s also President Obama’s signature achievement, which means it’s a high value target for his opponents. (credit:Getty Images)
AND THE GOVERNMENT SHUTDOWN?(06 of11)
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The shutdown occurred because Congress couldn't agree on a budget for the country. The Republicans tried to tie the dismantling of Obamacare to the passing of a national budget deal. When the Democrats failed to cave on the healthcare law, the government closed. The Republicans then tried the same hostage taking tactic over the debt ceiling. (credit:AP)
BUT WHY THREATEN THE DEBT CEILING?(07 of11)
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Breaching the debt ceiling would be catastrophic, but the US came to the brink of default because a small group of Tea Party-backed politicians didn't care if the government defaulted on its debts. They despise government and they despise Obama. Should the US have defaulted, it would have happened on Obama’s watch, which would have been a victory of sorts for the Republicans after their failure to dismantle Obamacare. (credit:AP)
THE 'CRAZIES'(08 of11)
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Led by Senators Ted Cruz and Mike Lee, this extreme wing of the Republican Party amounts to only 18% of the elected GOP, however it is hugely powerful thanks to the support of the Tea Party, who have threatened to challenge any Republican who voted in favour of a compromise with the Democrats. (credit:Getty Images)
WHO ARE THE KOCH BROTHERS?(09 of11)
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The Tea Party was able to threaten established GOP politicians because they have a lot of financial backing from wealthy businessmen such as the Koch Brothers. So any Republican politician that compromised would likely face a well-funded opposition campaign the next time voters went to the polls. (credit:Getty Images)
IDEOLOGY(10 of11)
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Even the Koch brothers did not want the US to default on its debt as that would have been bad for business. Which means something else was driving the Tea Party – ideology. The Tea Party came to prominence in 2008 after the global financial meltdown and the subsequent bailout. They wanted less government regulation, less national debt and more fiscal responsibility, HOWEVER... (credit:AP)
THE 'KENYAN'(11 of11)
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...2008 also saw the election of Barack Obama, the country's first African American President. The Tea Party didn't like this as they saw it representing a shift away from their view of "traditional America". As such, they set about challenging everything Obama did, even if that meant bringing the US and the world to the brink of financial disaster. (credit:AP)