What Is The Debt Ceiling And Why Does It Matter?

What’s up? Why, the debt ceiling, of course! No, no, you can’t see it - it’s so far up there that it’s pretty much only a concept at this point. But it’s a concept that could have a massive real world impact in the next few days. Yes, literally, in the next few days.

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How much debt does the US have? As of this writing, the national debt equals about $94k per American! Since well over half of American citizens don’t pay any federal income tax, if you divide the debt to actual taxpayers it’s more like $274k each! And you thought YOUR credit card bill looked ugly…

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Here are Five Fast Facts about the debt ceiling:

1. ❓ What Is It - The debt ceiling is the max amount of money the US can borrow to pay its bills. It does this by issuing bonds. These bonds are considered a very safe and reliable investment because the US has the biggest economy in the world and the dollar is the world’s reserve currency (for now 😅).

2. 📈 The Origin - The debt ceiling was started in 1917 to force the federal government to be financially responsible. Both Dems and GOP lawmakers have raised it a bunch of times over the years (78 times since 1960 alone). In recent years, it’s usually been used as a point of leverage for getting other legislation pushed through. Politicians politicking, you know?

3. 💸 Anything But Financially Responsible - We’re dealing with this (again) because the government spends more than it takes in taxes. The big problem is a failure of Congress and the White House to address this problem for decades. The current dispute is the latest in a depressingly long line.

4. 🧼 The Push For A “Clean Bill” - The White House floated the idea of using the 14th Amendment to simply raise the debt ceiling on its own, based on the Constitution saying that the public debt “shall not be questioned.” But while this addresses the immediate problem, even the White House admits there are big legal questions that may overturn the move later. Kicking the can down the road is what got us here, isn’t it?

5. 🤝 The Push For A Raise Plus Spending Cuts - The House has passed a bill to raise the debt ceiling along with some spending cuts to help prevent similar issues in the future. It still needs to be passed by the Senate and signed into law by the White House. That’s a lot of work to do in a short period of time!

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🔥Bottom line: Most Americans (63%) think the debt ceiling should be raised if spending reductions are included. Only 19% think a “clean bill” to raise the debt ceiling is the way to go.

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Nations all over the world – rich or poor – are concerned by the politicking here, and are watching very carefully. A default on US debt would drop a bomb into the financial markets and cause all kinds of problems for just about everyone, particularly us. The big concern with using the 14th Amendment is that it basically sidesteps Congress for control of the federal budget, removing its primary intended purpose as stated very clearly in the Constitution. The Treasury Secretary has also said this isn’t the right path.

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A tentative deal has just been reached between the White House and Congress…maybe. They need to move fast, as the US is already at the limit and needs to take action in the next couple of days to avoid the worst case scenario.

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How do you think we can prevent this from happening again in the future?

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