At present, members of Congress have raised the debt ceiling for the federal government a total of four times in the last two years. A fifth increase is likely to happen as soon as next month. The cause of this activity is due in large part to the record amount of borrowing the government has done in the last several months.
Standing at $12.1 trillion, the nation’s current debt ceiling will be pierced yet again. For those who don’t know, the debt ceiling is the cap on how much the country will allow itself to have in debt. You could look at it like a credit limit on a credit card. At the end of August, the national debt had reached $11.8 trillion, just $349 billion short of the current cap.
This debt ceiling is meant to curtail spending and serves as a big warning sign to legislators. It will be a serious undertaking to approve another change in the current ceiling. Yet, the facts are clear: Congressional members really don’t have a choice but to raise the ceiling.
Essentially, if they do nothing, the country would technically go into default on its debt. A ridiculous prospect but serious nonetheless since the ripples from such an event would cascaded through the economy.
In such a scenario, Treasury bonds would become due but the Treasure would be unable to borrow more money to repay the holders of those securities. Of course, the government could find additional funds to head off the default by borrowing money from sources like the federal employee retirement trust fund.
Already, the Treasury Department has been quick to post statements that it will do what it can to preserve the flexibility of national debt management. This may mean cutting back on those funds deposited in the financial rescue reserve so the money could be made available in case the ceiling isn’t raised in time. Still, such measures provide only temporary relief.
Though it is almost certain that legislators will throw support behind an additional increase, it is also clear that the issue itself is going to be a focus for controversy in both the House and the Senate. It is possible that the debate may be mired with the current struggle over health care reform.
Similar Posts:
- Debt Increase and Budget Deficits Remain Obstacles
- Minimum wage rises to £5.93
- Consumer Debt Is Continuing To Shrink
- Federal Reserve’s Assets Saw New Increases
- Va Refinance Is Coming Up These Days In Full Swing
Tags: Ceiling, Debt Ceiling
Recent Comments