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HomeOff Topics News & Politics › What’s the debt ceiling, and why is everyone in Washington talking about it?
04-19-2011 03:44 PM  7 years agoPost 1
Dennis (RIP)

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What’s the debt ceiling, and why is everyone in Washington talking about it?

By Ariana Eunjung Cha, Monday, April 18

What’s the debt ceiling?

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.

Why is this an issue now?

The nation’s debt is inching closer to the legal limit of $14.3 trillion. According to Treasury Secretary Timothy F. Geithner, the ceiling could be breached as soon as May 16, though the government could take unconventional measures such as halting contributions to pension funds to delay that point until July 8.

What happens if the debt ceiling is breached?

If Congress does not increase the limit, borrowed funds would not be available to pay bills and the United States may be forced to default on its debt obligations. There’s no precedent for this situation. Treasury has never been unable to make payments as a result of reaching the debt limit. With a fragile global recovery counting on U.S. economic stability, the debt limit issue could roil international financial markets. Democrats and Republicans agree that if the debt limit is not raised we would be inviting economic catastrophe.

So if both parties agree, why not just raise the limit? What is everyone arguing about?

In the past, raising the debt ceiling has mostly been a perfunctory matter. The ceiling has been raised almost 100 times since it was established and has gone from less than $1 trillion in the 1980s to $6 trillion in the 1990s. The most recent time the ceiling was boosted was in February 2010. Legislation to raise the debt limit usually prompts partisan posturing about fiscal responsibility, but little real drama. This time is different.

With the national debt at its highest point in 50 years compared with the size of the U.S. economy, the debate about the ceiling has become entwined in the larger issue about slashing the budget. The budget debate is shaping up around trying to balance two perhaps equally unpopular remedies: sharp cuts to popular government-funded programs and major tax increases. Republican lawmakers say that if they raise the limit they need a commitment from the White House for more spending cuts. The Obama administration has resisted the idea of including spending caps or other budget-process reforms in legislation to raise the debit ceiling, arguing that ensuring the government’s solvency is too important to be held hostage to other issues.

How much money are we talking about?

Under the spending plan President Obama submitted to Congress in February, lawmakers would have to raise the limit by nearly $2.2 trillion just to see the nation through next year. Under the more austere blueprint that House Republicans approved last week, the government would require about $1.9 trillion in fresh debt by October 2012 — a month before the next presidential election.

Why does the United States have so much debt anyway?

There are numerous reasons. Here are some major ones: Under President George W. Bush, the national debt soared to $4.36 trillion because of the cost of wars in Iraq and Afghanistan and new tax cuts, and again under Obama, an additional $3.9 trillion, because of the economic stimulus and decreased tax revenue during the recession.

http://www.washingtonpost.com/busin...tage%2BHotsheet

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04-19-2011 05:50 PM  7 years agoPost 2
SSN Pru

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awesome. Bush averaged .5 Trillion per year. Obama is on a track to average 1.8 Trillion (probably more if he gets his way) and yet the massive debt is pinned to Bush?

Stupidity can be cured. Ignorance is for life!

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04-19-2011 09:22 PM  7 years agoPost 3
helo_chris

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There are numerous reasons. Here are some major ones: Under President George W. Bush, the national debt soared to $4.36 trillion because of the cost of wars in Iraq and Afghanistan and new tax cuts
People really need to start being called out on this one. How exactly is it that tax cuts lead to increased deficits when revenues increase as a result?


Above is a screencap from page 22 of OMB's "Historical Tables: Budget of the United States." The column on the left represents total unified tax receipts, the center is total unified expenditures, and the right is the associated surplus or deficit.

The first Bush tax cuts happened in 2001 when we brought in $1.991 trillion in receipts. This declined for two years, then started increasing, and by 2005 not only were receipts higher than in 2001, they were also higher than the previous record set in 2000.

http://www.newsbusters.org/blogs/no...after-saying-re

"There is a fine line between cutting edge and bleeding edge.."

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04-19-2011 09:23 PM  7 years agoPost 4
helo_chris

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goodlettsville, tn

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What happens if the debt ceiling is breached?
And this only happens if we continue to have to borrow 40% of what we are spending.

"There is a fine line between cutting edge and bleeding edge.."

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04-20-2011 12:19 AM  7 years agoPost 5
baby uh1

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St. James, Mo.

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I don't know about everyone else but for me 14 trillion of debt is enough!

Anything is possible if you don't know what you are talking about!

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04-20-2011 12:43 AM  7 years agoPost 6
Wave

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Illinois

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I submit that the US debt numbers are meaningless. All the world economies are so tightly interconnected in the 21st century, that debt becomes meaningless.

..at the end of the day the guy with the biggest stick calls the shots.

We need to increase military spending.

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04-20-2011 01:09 AM  7 years agoPost 7
702nitro

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Las Vegas, NV

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The US has cornered itself and by increasing the ceiling it will only temporarily prolong the inevitable.

How much in interest is the US paying a month on foreign debt? Where is a trillion dollars going to come from? Folks look around you, every dollar that comes out of the printing press from the mint further dilutes the value of the dollar. Last time I heard, $1 is now worth $.04

We are now in super inflation and in 1 or 2 years we will be in hyper-inflation. Get ready for the end folks

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04-20-2011 01:59 AM  7 years agoPost 8
Dennis (RIP)

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Oregon

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We are now in super inflation and in 1 or 2 years we will be in hyper-inflation. Get ready for the end folks
It is coming, and it will not be pretty.

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