Debt Ceiling to be Raised Again Before Presidential Election: What You Need to Know
Kevin Craig— Each day, the US government spends more cash than it earns. It compensates the difference by borrowing funds. Consequently, with each day, the government’s debt rises. The debt ceiling implies the legal restraint on borrowing money by the federal government. The national debt is presently rising by nearly 150 million dollars every single hour. Hence, the government has two options at hand – it either needs to raise the debt ceiling or avoid spending more than it earns. In simple words, the government needs to balance the budget.
The debt ceiling, that has been the topic of debate over the last few months, has been flooded with a series of misconceptions and several blatant deceptions. Although a description of all the fallacies would be better performed by an author rather than a newspaper columnist, following are a few myths about the debt ceiling that you need to be aware of.
Without raising the debt ceiling, the government will default on Social Security benefits
By the month of August, the United States will possess $307 billion in bills, and nearly $172 billion in proceeds. Again, the interest on the debt will be almost $29 billion. Since non payment of debts would have disastrous global effects, Treasury Secretary Timothy Geithner will ensure that these debts are paid off first. There are roughly $2.6 trillion dollars in the Social Security Trust Fund. These assets could be employed for paying benefits. Moreover, Treasury Secretary Timothy Geithner may switch the interagency debt into publicly-held debt, avoiding not only a technical default but also averting any hindrance in government payments.
Raising the debt ceiling can be avoided without severe impact on the economy
In case the debt ceiling isn’t elevated, the national treasury will fall short by $135 billion. This stands for the fact that a lot of people who look forward to their payments, won’t get paid. For example, these could be organizations that traded equipments to the military, government employees, and doctors who served Medicare patients. Other than the individual hardships for those expecting to get their payments, it would be acquiring $135 billion from the economy at a time when the unemployment rate is quite high. The result would be disastrous for an already frail economy.
President Obama’s “balanced approach” – The middle position between the Democrats and the Republicans
Obama has suggested a “balanced approach”, which means expenditure cuts and revenue amplification to lower the deficit, as the “middle path” strategy. However, lowering deficits through a smooth combination of spending cuts and revenue increases is the Democrat’s approach, and not the “balanced approach”. In fact, even when the Democrats had huge popularity in the House and Senate, and President Obama was still well-liked, they didn’t hold adequate votes to raise earnings via raised taxes. This means that they have only limited support for revenue amplification in their own committee.
Given that the Democrats hold the Senate and the presidency, and the Republicans just hold the House, it’s assumed that the Democrats hold a bigger say in the debt ceiling negotiations
Countless House Republicans turned victorious in the election or reelection of 2010 with pledges to lessen federal expenditure. For a majority of them, this work is more important than elevating the debt ceiling. Their eagerness to stand together on this pledge has provided the Republicans with several advantages in debt ceiling negotiations. A rise in the debt ceiling can never be conceded without support from the House. This basically means that the debt ceiling cannot be raised unless House Republicans receive a considerable amount of what they require.
This is a guest post by Kevin Craig who is a financial writer associated with Oak View Law Group. He has been providing prudent advice on measures to rid debt since 2007 to lead people to a debt free life. Also, he has written many informative articles on bankruptcy, credit counseling, credit repair, debt relief plan, personal injury, debt negotiation and so on. You can get in touch with Kevin Craig at email@example.com.