The Debt Ceiling, Explained

[Curt James]

The Debt Ceiling, Explained

By Jacob Goldstein
Published: April 11, 2011

Every day, the federal government spends more money than it takes in. It makes up the difference by borrowing money. So every day, the government's debt increases.

Some time next month, total federal debt will rise above $14.3 trillion.

There's a law on the books ??? first passed in 1917, updated many times since ??? that caps the federal debt at $14.3 trillion. This is the debt ceiling.

Some time very soon, the government either has to raise the debt ceiling or stop spending more than it takes in (in other words, balance the budget).

Balancing the budget would mean cutting spending by about 40 percent, raising taxes by a comparable amount, or enacting some combination of massive spending cuts and huge tax increases. (Context: Every penny of discretionary spending, including defense, amounts to about 40 percent of the budget.)

Balancing the budget immediately bears no resemblance to the budget and tax policies passed by Congress in the past few months. It would be a much bigger, much faster spending cut and/or tax hike than leaders of either party are proposing.

Trying to stay below the ceiling could also ultimately force the government to default on its debt, which has never happened in U.S. history.

Because U.S. Treasury bonds are held around the world, and are considered nearly as safe as cash, a U.S. default would create economic chaos.

Congress has raised the debt ceiling 10 times in the past decade, according to National Journal. And it seems likely that the current debate over the debt ceiling comes down to what sort of posturing, or negotiating, or whatever, will happen between now and whenever Congress votes to raise it again.

From NPR.org

 

[IronAddict]

The Debt Ceiling, Explained

By Jacob Goldstein
Published: April 11, 2011

Every day, the federal government spends more money than it takes in. It makes up the difference by borrowing money. So every day, the government's debt increases.

Some time next month, total federal debt will rise above $14.3 trillion.

There's a law on the books — first passed in 1917, updated many times since — that caps the federal debt at $14.3 trillion. This is the debt ceiling.

Some time very soon, the government either has to raise the debt ceiling or stop spending more than it takes in (in other words, balance the budget).

Balancing the budget would mean cutting spending by about 40 percent, raising taxes by a comparable amount, or enacting some combination of massive spending cuts and huge tax increases. (Context: Every penny of discretionary spending, including defense, amounts to about 40 percent of the budget.)

Balancing the budget immediately bears no resemblance to the budget and tax policies passed by Congress in the past few months. It would be a much bigger, much faster spending cut and/or tax hike than leaders of either party are proposing.

Trying to stay below the ceiling could also ultimately force the government to default on its debt, which has never happened in U.S. history.

Because U.S. Treasury bonds are held around the world, and are considered nearly as safe as cash, a U.S. default would create economic chaos.

Congress has raised the debt ceiling 10 times in the past decade, according to National Journal. And it seems likely that the current debate over the debt ceiling comes down to what sort of posturing, or negotiating, or whatever, will happen between now and whenever Congress votes to raise it again.

From NPR.org

Yes, That is it in a nut shell! But since when do politicians on the wrong want to politicise this and try to make this just another wedge issue. Like the article says, When the wrong had the office,they raised it 10 times, now, they are acting like this is a taboo.

I swear, sometimes I hate our politics.

And even worse, I even hate that I made a sacrifice and almost died in combat, just to hear boehner say, he's in a foxhole.

Just to prove he's a dumb fucker. Foxes hide in their holes.

What you meant to say is, your in a fighting hole, and who digs those?

You dumb fucker.

 

[maniclion]

I can't figure out what's happening anymore, how did we get this pathetic, I have been morose and unmotivated since the last shuttle launch. I love the shuttle and having a reusable space craft with a cargo bay just makes sense to me, now we're gonna go back to rockets... It bums me out... How can a nation with companies like Google, Microsoft, Intel and all that be so far in the red, do they all shirk their taxes that much?

 

[LAM]

Yes, That is it in a nut shell! But since when do politicians on the wrong want to politicise this and try to make this just another wedge issue. Like the article says, When the wrong had the office,they raised it 10 times, now, they are acting like this is a taboo.

I swear, sometimes I hate our politics.

And even worse, I even hate that I made a sacrifice and almost died in combat, just to hear boehner say, he's in a foxhole.

Just to prove he's a dumb fucker. Foxes hide in their holes.

What you meant to say is, your in a fighting hole, and who digs those?

You dumb fucker.

the debt ceiling was raised 11 times under the 8 years of GWB. between borrowing money to pay for 8 years of Bush supply-side tax cuts and the middle east wars is why Obama inherited an 9T deficit right off the bat. GWB presided over the weakest economic expansion in US history. that and 9% unemployment is what the current administration walked into Nov'09.

 

[GearsMcGilf]

the debt ceiling was raised 11 times under the 8 years of GWB. between borrowing money to pay for 8 years of Bush supply-side tax cuts and the middle east wars is why Obama inherited an 9T deficit right off the bat. GWB presided over the weakest economic expansion in US history. that and 9% unemployment is what the current administration walked into Nov'09.

9T deficit? We don't even have that much yet. But,it won't be long. Yes, Barry inherited a mess. But, when is his admin going to lift a finger to turn things around? Bush's fuck ups shouldn't be used to justify the current admin doing more of the same.

 

[dirtwarrior]

Many are pointing fingers at GWB. Bad economy was brewing much before he got into office.

 

[tommygunz]

Are you serious? That's like saying people are pointing the finger at Philips Morris for causing lung cancer. The Bush's, yep the whole bunch of them, are notorious for lining the top 5%'s pockets. I don't like what the current administration is doing either, but gotta say George & Jr. sure left a house of cards.

 

[dirtwarrior]

I agree with you but it has been brewing for a while

 

[LAM]

9T deficit? We don't even have that much yet. But,it won't be long. Yes, Barry inherited a mess. But, when is his admin going to lift a finger to turn things around? Bush's fuck ups shouldn't be used to justify the current admin doing more of the same.

the economy will never be turned around until people start getting paid real wages. the median income in 2010 with 2 wages earners being equal o 1 wage earner in the mid 1980's, it's beyond ridiculous. 25% of the US gets paid low wages, so these people get crushed by inflation and anytime there is an increase in energy or food. annual inflation wipes out wages increases by the CPI so every year the majority of the population makes less and less but is expected to pay more and more for goods and services.

anyone that doesn't address wage inequality isn't trying to fix the problem because that is the main one. and how can the current admin do anything with a cry baby speaker that's basically useless and hasn't lifted a finger to help the middle class. not a single piece of legislation from the House to date with any solutions to help the middle class.

there is no economic data in US history that shows tax cuts for corps or the top 2% spur job growth, it's straight up supply-side bullshit...

 

[Big Smoothy]

Personally, raising the debt ceiling will likely happen, and it's just:

business as usual..

The article notes the debt ceiling has been raised 10 times in the past decade.

And it has been raised over 70 times over the last 65 years (post-WWII).

IIRC, Congress has never, not once voted to not raise it, and it definitely has not voted to lower it.

They will make a deal, because of the importance of doing so.

All this "debate" is mostly political posturing, IMO.

But world now knows, the US is a house of cards.

Personally, I'd like to see the debt ceiling not raised to further awaken the populace how screwed we are, and will be in the future.

Politicians from both parties, have run us on a course to ruin.

The sooner we take the painful medicine, the better. Because we will, have to take it.

 

[Muscle_Girl]

Personally, raising the debt ceiling will likely happen, and it's just:

business as usual..

The sooner we take the painful medicine, the better. Because we will, have to take it.

Yea, I find it very silly that they play it out like this every time. Put the financial world into panic so much that it barely panics anymore, except for the days leading up to the deadline. It will be increased, stop with the mind games and just damn well do it. If the US defaults the ripple effects are endless, so they won't let it happen.

Wasn't it Clinton that removed the most debt during his stay in the White House the most of any president? Maybe you all should get him back in there

 

[IronAddict]

the debt ceiling was raised 11 times under the 8 years of GWB. between borrowing money to pay for 8 years of Bush supply-side tax cuts and the middle east wars is why Obama inherited an 9T deficit right off the bat. GWB presided over the weakest economic expansion in US history. that and 9% unemployment is what the current administration walked into Nov'09.

No doubt!

I'm just apalled by the audacity of these feckless politicians that use the citizens of this great country as pawns for their political posturing, and to try hold its citizens as hostages to further their greedy agenda.

 

[LAM]

No doubt!

I'm just apalled by the audacity of these feckless politicians that use the citizens of this great country as pawns for their political posturing, and to try hold its citizens as hostages to further their greedy agenda.

below is a great read, also check out the graph on page 5.

ABANDONING WHAT WORKS
(AND MOST OTHER THINGS, TOO)
Expansionary fiscal policy is
still the best tool for boosting jobs
http://www.epi.org/page/-/old/briefingpapers/BriefingPaper304 (4).pdf?nocdn=1

 

[GearsMcGilf]

anyone that doesn't address wage inequality isn't trying to fix the problem because that is the main one. and how can the current admin do anything with a cry baby speaker that's basically useless and hasn't lifted a finger to help the middle class. not a single piece of legislation from the House to date with any solutions to help the middle class.

there is no economic data in US history that shows tax cuts for corps or the top 2% spur job growth, it's straight up supply-side bullshit...

You keep talking about higher wages, but where is the money gonna come from? When the price of labor increases, the supply naturally increases, whilst the demand drops. Companies will simply try to get more work out of fewer employees. If minimum wage were increased to $15/hr tomorrow, you can imagine what the unemployment rate would be. Next time you went to get a burger, you'd be waiting in line for a while, since there'd be a store manager and maybe two clerks waiting on you and everyone else in line, unless the public was willing to pay $25 bucks for that burger. Higher wages would be great, but where's the $ going to come from?

 

[LAM]

You keep talking about higher wages, but where is the money gonna come from?

maybe the 2T in profits that US company's made in 2010 but paid 90B worth of taxes on...

US profits are just a percentage of what the multinationals make globally because profits earned out of the US are not brought back into the country.

 

[Big Smoothy]

We should also remember that:

The US gov has been tapping into federal employee pension funds to run on fumes since May.

Geithner said (to paraphrase): 'Don't worry workers and retirees. The Treasury will pay back into the retirement funds.'

You can find this by googling.

My point: it's a house of cards.

 

[Big Smoothy]

We should also remember that:

The US gov has been tapping into federal employee pension funds to run on fumes since May.

Geithner said (to paraphrase): 'Don't worry workers and retirees. The Treasury will pay back into the retirement funds.'

You can find this by googling.

My point: it's a house of cards.

 

[GearsMcGilf]

maybe the 2T in profits that US company's made in 2010 but paid 90B worth of taxes on...

US profits are just a percentage of what the multinationals make globally because profits earned out of the US are not brought back into the country.

I agree. But, when it's overseas, not much can be done. On the other hand, when they operate overseas, they do have expenses to pay in the other countries where they operate; wages, bribes, etc, albeit slave wages and shitty working conditions most of the time. That's globalization for us. I don't think that's gonna change though.

That leads to the argument that Bill Clinton was making. With a more competitive corp tax rate, perhaps some of those companies would come back. On the other hand, with less regulations and cheaper labor, the corp tax rate might not make much difference. There's clearly no quick fix.

 

[LAM]

I agree. But, when it's overseas, not much can be done.

the US has tax treaties with 42 countries so they share information with the IRS. if they can take it from the individual no reason why they can't from the multi-national corporation.

United States Income Tax Treaties - A to Z
United States Income Tax Treaties - A to Z

 

[AdmiralRichard]

 

[hoyle21]

Wasn't it Clinton that removed the most debt during his stay in the White House the most of any president? Maybe you all should get him back in there

I would not only vote for him, I would make sure he gets BJ's from hot chicks instead of the fat oafs he was used to.

I actually give some of the credit to GHWB though.

Herbert Walker Bush actually made big economic changes to what Reagan did. He called supply side "voodoo economics" and rightfully so

 

[LAM]

Wasn't it Clinton that removed the most debt during his stay in the White House the most of any president? Maybe you all should get him back in there

Clinton not only paid off the remaining debt from WWII but he also revamped the welfare system which substantially reduced the amounts of direct money transfers from the gov to the individual, once adjusted for inflation that amount has not increased since.

 

[hoyle21]

Clinton not only paid off the remaining debt from WWII but he also revamped the welfare system which substantially reduced the amounts of direct money transfers from the gov to the individual, once adjusted for inflation that amount has not increased since.

It always cracks me up the hard on the right has for Clinton. He was the most financially responsible/conservative president of my lifetime.

 

[GearsMcGilf]

It always cracks me up the hard on the right has for Clinton. He was the most financially responsible/conservative president of my lifetime.

Yes, ironically, Bill who was supposedly a liberal democrat, was much more fiscally conservative than his successor. Then again, he was also working with a Republican Congress. Who knows what things would have looked like if he'd had a Nancy Pelosi standing behind him with her hand up his ass like Barry. Just sayin.