Most People Dont Understand Our Governments Debt Ceiling

Large Percentage Of Americans Do Not Understand What The Debt Ceiling Is by WV News Staff

The government now borrows more than 40 cents of each dollar it spends. If the debt ceiling does not rise, the government would need to choose what to pay and what not, including benefits like Social Security, wages for the military or other bills. It also might delay interest payments on Treasury bonds.

The Who-What- Where And When Of The Debt Ceiling 

Here is one laymen term to sum up what the National Debt Ceiling is...  “It's a legal limit on how much debt the government can accumulate.”

Article I Section 8 of the United States Constitution gives the Congress the sole power to borrow money on the credit of the United States. From the founding of the United States through 1917 Congress authorized each individual debt issuance separately.
.
In order to provide more flexibility to finance the United States' involvement in World War I, Congress modified the method by which it authorizes debt in the Second Liberty Bond Act of 1917. Under this act Congress established an aggregate limit, or "ceiling," on the total amount of bonds that could be issued.

The modern debt limit, in which an aggregate limit was applied to nearly all federal debt, was established in 1939. The Treasury has been authorized by Congress to issue such debt as was needed to fund government operations (as authorized by each federal budget) as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.

The United States is one of the few countries where Congress sets a ceiling on government debt, which creates “periodic uncertainty” over the government's ability to meet its obligations. Most countries let their debts rise automatically when government spending outpaces tax revenue. Congress has increased the debt limit 10 times since 2001.

Our government now borrows more than 40 cents of each dollar it spends. If the debt ceiling does not rise, the government would need to choose what to pay and what not, including benefits like Social Security, wages for the military or other bills. It also might delay interest payments on Treasury bonds. Any default could lead to financial panic weakening the country's credit rating, the dollar and the already hobbled economy. Interest rates would likely rise, increasing the cost of borrowing for the government and ordinary Americans.

How Does The Debt Ceiling Differ From The Federal Deficit?

The deficit is how much government spending exceeds tax revenue during a year. Last year, the deficit was $1.29 trillion. The debt is the sum of deficits past and present. Right now, the national debt totals $14.3 trillion set in 2010.

Currently, the U.S. government owes itself $4.6 trillion, mostly borrowed from our Social Security revenues. The remaining $9.7 trillion is owed to investors in Treasury securities, banks, pension funds, individual investors, state and local governments and foreign investors and governments. Nearly half of that - $4.5 trillion is held by foreigners including China with $1.15 trillion and Japan with $907 billion.

The biggest contributors to the nearly $9 trillion increases over a decade were in the 2001 and 2003 tax cuts under President George W. Bush: $1.6 trillion.

Wars in Iraq and Afghanistan have cost approx. $1.3 trillion. The economic stimulus package under Obama is $800 billion. In 2010, there was the tax cuts compromise by Obama and Republicans that extended jobless benefits and cut payroll taxes added $400 billion. Medicare's prescription drug benefit creation in 2003 cost $300 billion. In 2008, the financial industry bailout cost $200 billion.

And, there are the hundreds of billions less in revenue than expected since the latest recession began in December 2007.

In Closing…

Congress has until Aug. 2, 2011 to raise the federal borrowing limit or the government will run out of money and possibly default on its debt. House Republicans say they won't raise the debt limit without equal spending cuts. President Obama and Democrats insist that higher revenues must be included.

As one reader puts his views of the Debt Ceiling into perspective... "it's like an artificial limit on how much the country can gamble, similar to a Las Vegas casino. Unfortunately the congress has already appropriated funds to run the country but neglected to make certain that enough revenue is coming in to pay for the debt service on the national debt that previous congresses have approved for the citizens to subsidize.”

End Of Story….

Jack Swint-Publisher

WV News 2011

(304) 982-7024

E-Mail:  WestVirginiaNews@gmail.com

Twitter:  @WVNewsOnline

.

.

.

.

.