Washington is seeing a bit of drama unfold. President Obama and Republican leaders in Congress face off over tax breaks and their impact on the nation’s long-term spending. This can affect the debt limit.

Obama squares off with Republicans!

The debate over increasing the U.S. Government’s debt limit is the talk of the town in Washington, D.C., placing President Obama against his conservative, anti-tax political adversaries. Obama and Democrats in Congress want some tax breaks to end. These include taxes for the nation’s wealthiest families and largest oil companies. They represent part of a deal to cut government spending over the next decade.

But that’s at odds with anti-tax Republican members of Congress and their Tea Party supporters, who adamantly oppose any tax increases and want to drastically cut government spending. When Republicans took control of the House of Representatives after the 2010 election, analysts expected tax increases to stay off the table.

But as the debate over the debt ceiling heats up, President Obama is seeking to frame Republicans as the protectors of unpopular tax breaks that come at the expense of massive cuts to Medicare, the nation’s public health care program for millions of senior citizens, and to college scholarships for students.

Lessons from the Debt Limit

Obama has said that a deal is close to being reached, but is adamant that certain “tax expenditures” be eliminated to raise revenue. If they don’t reach a deal, that’s where the real trouble comes in. Economic analysts have warned that if the U.S. Government defaults on its debt obligations, the dollar’s value would plunge. Additionally, interest rates would skyrocket and the economy would go into freefall.

Nevertheless, as the two sides argue over taxes and spending, Uncle Sam will be focused on revenue collection. If you owe back tax debt to the IRS, you know how the IRS isn’t cutting anyone any slack. That’s why hiring a tax attorney is your best move if you’re being pursued for tax debt. The IRS settles tax debts for a fraction of what’s owed – but if you don’t hire a tax attorney, you’re less likely to get that kind of deal. Instead, you’ll be looking at a wage garnishment or bank levy.

Top economic analysts have warned of potentially catastrophic repercussions if we do not raise the ceiling by August 2. They include skyrocketing interest rates and a plummeting U.S. dollar.