What is the debt ceiling?
From March 2011 - courtesy of Agamitsudo
All summer long, talks of exceeding the debt ceiling have dominated the business pages of your local newspapers and news websites, but much of the public may not understand why there is a debt ceiling or why it matters now. Culling from some strong sources, here are the answers you need before the topic arises again:
The debt ceiling is “the legal limit on borrowing by the federal government. Before 1917, Congress had to approve borrowing each time it came up. In order to allow for more flexibility as the nation entered World War I, lawmakers agreed to give the federal government blanket approval for most types of borrowing — as long as the total was less than an established limit.”1
The first debt ceiling was set at $11.5 billion and now resides at just under $14.3 trillion, so obviously the ceiling has been unceremoniously raised time and time again (74 times since 1962).2 This time around, there is a major disagreement between the two political parties in how to go about lowering the debt. In an overly simplified answer, the Democrats are proposing tax hikes while the Republicans are demanding budget cuts, so a stalemate has resulted because the Republicans are currently unwilling to sign off on any legislation for an increased debt ceiling if major budget cuts aren’t a part of the mix. The reality is that a lot of cuts AND a lot of extra income is required to even make a dent in the trillions of dollars owed by America’s piggy bank, but each political side will only budge as much as necessary at the risk of alienating any potential voters in the next election.
The irony? The debt ceiling was established to CONTROL government spending. Hee hee. Thanks to circular tax cuts, budgets getting signed off with a predetermined negative bottom line, lending money the country doesn’t have, and billions invested in wars, America sits with an empty wallet and more money owed than the average politician can feasibly comprehend. There is no easy solution, but at least now you have a few facts to form your own opinion on how to solve America’s financial problems in five easy steps!
One last fact: the actual ceiling was already reached on May 16, but some creative accounting and deferred investments have pushed the ceiling date to something closer to August 2.
Read on:
USAToday.com – Obama, GOP, debt — what’s the real deadline?
WashingtonPost.com – What’s the debt ceiling, and why is everyone in Washington talking about it?
CNN.com – U.S. hits debt ceiling
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Boehner to Tell Republicans No Deal to Report on Debt Ceiling… DONT RAISE DEBT CEILING WE RATHER SEE GOVT FAIL SHUT DOWN UNIONS wont be FUNDING OBAMA LOWER DEBT CEILING…HOW ABOUT THAT? TCOT.