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What is the debt ceiling? An explainer
Confused by all the mud-slinging around Washington over the debt ceiling? Don't know who to blame? Here's a quick explainer on the debt ceiling's function and why this fight could turn out to be messy.
The debt ceiling -- or the debt limit, as the Treasury calls it -- is, quite simply, the amount of money that the government is legally allowed to borrow.
Every year, the Congress decides how much it's going to spend - that's the budget. And depending on what it puts in the budget, the government gets a load of bills in the mail every month. Just like every American does. The U.S. government's bills are quite a bit bigger: It has to pay its employees; it has to pay its contractors; it has to pay for the stuff that its buys; and it has to pay the interest on its debt.
The arm of the government that makes those payments is the Treasury. It uses the money that the government collects in taxes to pay most of the bills. And if it hasn't got enough money, then it borrows some more to make up the difference. Again, like an American would do with a credit card.
But the Treasury's only allowed to borrow up to a certain amount. And it's credit limit -- the debt ceiling -- is decided by Congress. If it needs to borrow more, it has to get permission to do so.
That's right -- it's Congress that decides the amount we can spend, and it's Congress that decides the amount we can borrow. Right now, those amounts aren't matching up. And if Congress can't get them to match, then some of those bills aren't going to get paid.
And that's a problem.
Good for you! But I'd suggest it's not so much that you give yourself permission to pay the bills you want - I get the feeling that you're the kind of good citizen who pays off aany and all bills - it's more that you're forward thinking enough to give (or deny) yourself permission to rack up those bills in the first place. As for us suffering when an entity fails to pay its bills, I take it you're talking about our government...which we elected. So, only one thing to do there!
I grant myself permission to pay the bills I want. Problem is when I don't pay them, I'm the one who suffers. How is it that when an entity doesn't pay its bills, we are the ones who suffer? One thing is certain, I won't be putting multiple generations in debt due to the loans I take out any time soon. That's a promise.
