The US Treasury has
announced that the $16.7 trillion debt ceiling must be raised by October 17th
of this year. The Treasury already hit the debt ceiling in May, but since then
has been using investing tricks to keep the money flowing. However, Treasury
Secretary Jacob Lew says that on October 17th, those tricks will no longer be
able to continue working. Mr. Lew estimated that they spend about $60 billion a
day, but only have about $30 billion in cash on hand. If the US Congress does
not raise the debt ceiling, Mr. Lew warns that the United States will not be
able to keep up with its necessary payments. Of course, each party
has a different opinion on the matter.
The majority of the Democrats feel that
raising the debt ceiling is an unconditional necessity needed to keep their
government functioning. However, it is important
to remember that raising the debt ceiling doesn’t mean that the US government
will spend more money, but rather that they will have the money to pay off
debts that have already been set into place. The money needs to go to the government’s
obligations, such as Social Security and paying the military. In the event that
an agreement is not reached on the debt ceiling, it could mark the first time
in history that the US government knowingly failed to fulfill their financial
obligations. Additionally, credit rating agencies will likely drop the United
States’ credit rating from AAA to AA-plus. While this may not seem like a
terrible thing, it could actually have serious implications. It would certainly
lower the world’s faith in the US dollar, which is currently considered as the
cornerstone of the world economy. The stock market could also be negatively
impacted. Investors could move their money from the US market to another nation
that they see as more trustworthy, further harming our economy. President Obama
referred to not raising the debt ceiling as a “self-inflicted wound” to our
economy.
Meanwhile, the Republican Party feels that raising the debt ceiling is a bad idea because it will further increase our already tremendous national debt. US House of Representatives Speaker John Boehner said that his party will absolutely not accept a 'clean' raise to the debt ceiling. He feels that it does not address the issue of our growing national debt. He and his party want to instead include conditions that will help limit the spending of the government until it can get its deficit under control. Some of the spending that he would propose to cut would come from the Affordable Care Act, Medicare, and Medicaid. Of course, these cuts will not come without serious opposition from the Democrats.
No matter which way the debt ceiling debate swings, any sort of long-term debate could have very serious implications on the American economy. It could negatively effect consumer and business confidence, raise the interests on mortgages and loans, and harm the stock market. It is important for Congress to make the right decision in a timely fashion so the United States' economy retains its international prestige.
A graph showing the projected national debt compared to the debt ceiling
Young Americans for Liberty displayed a
temporary, 40-foot-long debt clock at the University of California
Irvine and collected petition signatures to protest the over $14
trillion national debt.
Man protests the raise of the debt ceiling
The two biggest figures in the debt ceiling battle will be President Barack Obama and Speaker of the House John Boehner
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