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Author Topic: Is the Debt Ceiling a Good Idea?  (Read 3451 times)

Offline CliffordK

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Is the Debt Ceiling a Good Idea?
« on: 29/07/2011 08:12:30 »
Is the Debt Ceiling a Good Idea?

On February 12, 2010, the current Debt Ceiling was set at $14.294 Trillion here in the USA.  Is there any point of having a Debt Ceiling if it is anticipated that it will be modified every time we get close to the limit (projected for next week).

All the news agencies are saying that our government will shut down next week if the Debt Ceiling is not increased.

But...  that ignores that the Federal Government has about $4.5 Trillion in Annual Revenue.

I.E.  Not increasing the Debt ceiling would be essentially just enforcing that the government just balances the budget and spends within its means.  The problem is that since a year and a half ago with the last increase in the debt ceiling, there has been little effort to curtail spending or increase revenue, and balance the budget. 

This isn't just a US problem, or a Greek problem, or a Portuguese Problem, but is truly a global issue.

So..  is the answer to just let the Debt Ceiling expire?


 

Offline Don_1

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Is the Debt Ceiling a Good Idea?
« Reply #1 on: 29/07/2011 08:44:36 »
What I'd like to know is, if virtually the entire western world and third world are in debt up to their eyeballs, who did they lend the money from?
 

Offline Airthumbs

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Is the Debt Ceiling a Good Idea?
« Reply #2 on: 29/07/2011 15:15:06 »
What I'd like to know is, if virtually the entire western world and third world are in debt up to their eyeballs, who did they lend the money from?

To answer this question I would take a look at the people who have the most money in the world and I am willing to bet they have something to do with it.  Personally I feel that we have been living in an artificial world of money and the sooner it all comes crashing down the better.
 

Offline imatfaal

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Is the Debt Ceiling a Good Idea?
« Reply #3 on: 29/07/2011 16:58:52 »
for an absolutely weird way of viewing US debt
http://www.wtfnoway.com/
 

Offline JP

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Is the Debt Ceiling a Good Idea?
« Reply #4 on: 29/07/2011 18:43:29 »
I.E.  Not increasing the Debt ceiling would be essentially just enforcing that the government just balances the budget and spends within its means.  The problem is that since a year and a half ago with the last increase in the debt ceiling, there has been little effort to curtail spending or increase revenue, and balance the budget. 

Actually, that's not the problem as I understand it.  The problem is that the congress can pass a budget that requires the government to take out debt (by authorizing more spending than revenue) but that the debt ceiling is not tied to this budget.  In other words, the current budget requires the government to borrow money, but now congress is refusing to let the government borrow money!

Having the debt ceiling be separate from the budget really doesn't serve much useful purpose, and it allows a crisis like this to occur.  Why would you ever want to have a system that allows a budget to be passed by congress but not paid for?

I do think that the question of reigning in the debt is important, but it really should be addressed when designing budgets, not when the time comes to pay for those you've passed.  Having a debt ceiling just encourages congress to throw political tantrums when it comes to paying for spending they've already approved rather than actually addressing the tough questions about debt when authorizing that spending in the first place.

Fun fact: The debt ceiling was originally set up this way during World War I to give the government more flexibility to spend.  According to the constitution, only congress can authorize debt.  Presumably they wanted to set a limit for debt, but not force the government to take on all of that limit in the case of war spending...
« Last Edit: 29/07/2011 18:49:03 by JP »
 

Offline CliffordK

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Is the Debt Ceiling a Good Idea?
« Reply #5 on: 29/07/2011 19:42:15 »
Yes, I was wondering about the budget vs debt ceiling.  Budgets normally extend out a decade or so, and far exceed the debt ceiling.  And there would be chaos when about 1/3 of our government is unfunded, just nobody knows which third.

The idea behind the WWII debt was that one built up debt during times of crisis, and paid it off afterwards.  Thus a debt ceiling would be appropriate.  The only unknown variable was how long the war would last. 

Unfortunately it became too easy to build government debt, sometimes in preposterous amounts. 

It is like getting a revolving credit loan at the bank.  But, budgeting that all the money from the loan will be spent, and that you will just go and ask for a new loan the next year.  But...  what happens when the bank denies the new loan?  In fact, what happens when a balloon payment is due on the old loan and a new loan isn't granted?

Unfortunately shutting down 1/3 of the government overnight would likely plunge the country back into a recession.
 

Offline Geezer

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Is the Debt Ceiling a Good Idea?
« Reply #6 on: 30/07/2011 06:34:34 »
It's a funny old system. Everyone knows that if the US goes TU*, so does everyone else.

So, while everyone wants the get the "boot in", they know that if they are too effective, the boot will eventually be stuck up their own arse.

(*Terminals Up)
« Last Edit: 30/07/2011 18:04:52 by Geezer »
 

Offline neilep

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Is the Debt Ceiling a Good Idea?
« Reply #7 on: 30/07/2011 15:30:20 »
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Offline neilep

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Is the Debt Ceiling a Good Idea?
« Reply #8 on: 30/07/2011 15:30:52 »
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Offline CliffordK

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Is the Debt Ceiling a Good Idea?
« Reply #9 on: 31/07/2011 20:42:02 »
Default, or late payments on loans would be very bad, and could have long lasting repercussions.

However, what if Congress actually manages to prove that we don't need to raise the debt ceiling?  I doubt they are prepared to do the massive reworking of the federal budget required to balance the budget, but technically it would be possible. 

My guess, is that there will be several expenses that will just get put off for later.  And, in doing so, they will likely add considerably to the cost.  I.E. mothballing ongoing projects for a month often doesn't make economic sense, especially when the summer is often the best time to do things like construction.
 

Offline CliffordK

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Is the Debt Ceiling a Good Idea?
« Reply #10 on: 01/08/2011 21:52:06 »
It sounds like Congress will likely pull off a last-minute stop-gap measure, then all will be forgotten until the next budget or debt ceiling change.  I do still believe that if they set a "ceiling", they should take measures so that it isn't met within a year or two.

I heard a comment on NPR today.

Politics is a word...  formed from Poli + ticks.... I.E. many blood sucking insects!   [:o)]
 

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Is the Debt Ceiling a Good Idea?
« Reply #10 on: 01/08/2011 21:52:06 »

 

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