The debt ceiling: what you need to know

We are close to reaching our country’s “debt ceiling”.  In layman’s terms, that means that Congress has said we can only borrow some $14 plus trillion (mostly from China) and after that the “credit card” is cut off.  This administration has told us that if we don’t raise our credit card limits, a parade of horribles will befall us.

I found a marvelous article today authored by Emil W. Henry, a former assistant secretary of the Treasury. 

No, if Congress fails to raise our country’s credit card limit, the skies will not fall, giant cracks will not open in the earth, and the seas will not rise.

Here is the truth.

Four times the ceiling has been reached, remaining in place for months while Congress found consensus, and there was no disruption to the capital markets. [emphasis supplied]

And then we hear this from the administration.  If we don’t increase our credit card limits, we will  not be able to pay the interest owed to those who have loaned us money.

That is not exactly true either.

According to the Congressional Budget Office, tax revenues for 2011 will be around $2.2 trillion, with net interest on the debt costing $225 billion.

So, our country’s income, via tax revenue, is more than enough to cover the interest on our credit card, but “light years away”  from reducing the balance on our credit card.

Spending problem?

9 replies
  1. Plainvillian
    Plainvillian says:

    Never let a crisis go to waste.? If no crisis exists, create one.? If one cannot be created, imagine one.? If a crisis cannot even be imagined, have Paul Krugman write about one.? Then have those intellectual and ethical giants, Biden and Geitner opine throughout the land.
    Yep, we are in the best of hands.

  2. RoBrDona
    RoBrDona says:

    Sound and fury signifying nothing. The debt ceiling (so called) is?a paper ruse. Since the 60s we have met it about every 8 months on average. It is only reported when one?party feels that they have a substantial grievance against the other.? It is imagined crisis – the Treasury has a variety of devices to stave off any real problems.? Unfortunately, Congress will raise it anyway, after it has been used artlessly as a tool to manage public perception.

  3. BEA
    BEA says:

    Hey, I love this “raise the debt ceiling” idea! I’m gonna ask my husband if he’ll raise our debt ceiling. I’ll let you know how that works out for me…

  4. WagTheDog
    WagTheDog says:

    Why is it that we seem to follow the Keynes theory so closely? ?It is a very euro-centric in that everything springs from the government, and the people are subjects of that government. ?We (the UNITED States of America) have a?different?approach?where the government is a reflection of the people to provide one thing – a common entity between states. ?With this idea, the Federal Government is now free to provide a common?defense, represent the states to?foreign entities, and promote the general welfare of the UNITED States. ?That doesn’t include career politicians (who become like Lords in?Parliament,??not?representatives?in Congress). ?This also removes the Federal Government from being a drain on capital, and not?influencing?the country;s economic health. ?Where and when did we move from a government for the people and by the people to a government over the people and make it look like Europe again?

  5. Dimsdale
    Dimsdale says:

    The debt ceiling is as ethereal as a soap bubble.? It reflects the unreality of the world politicians live in down in D.C.; it is nothing like the budgets that we have to live with in our own homes.? They can vote for their own pay, spend other people’s money, and unilaterally raise their credit limits.
    It is time to tie the debt ceiling to the economy and reality.? Incompetent pols should not be given a “get out of jail free” card every time they overspend, which is every time, in pursuit of votes.

  6. PatRiot
    PatRiot says:

    Mr. Henry makes this simple to understand.? And the solution is simple, don’t spend more than you bring in.
    Spending problem? Yes.? The addiction to spending bought us here.
    The answer seems simple too:? Don’t feed the addiction and throw the bums out.
    So how is it I find it so hard to take those actions?

  7. johnboy111
    johnboy111 says:

    we all soon live in a cave with no lights..the enviro groups will be soooo happy.thank Barry

  8. Linda Mae
    Linda Mae says:

    Let’s send this to all 535 members of congress!
    “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
    David Copperfield
    We forget that Dickens knew about the Poor Houses – very uncomfortable substitute for welfare.? Well, the Brits never learned the lesson.

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