While I donít claim to be an expert, in this article I hope to explain the debt ceiling and some of the components to this debate so that we can understand how this may impact our countryís future.
In basic terms, the debt ceiling is comparable to the line of credit we may be allowed on a credit card. So if you have a $10,000 credit line, it means you cannot spend more than that.
Our government is reaching its limit and once we do, then we canít spend anymore money. Now I donít have an exact figure on the amount but we are into the trillions of dollars as a result of our ongoing borrowing.
Just as you might ask the credit card company to increase your credit line, so are some in government. They want to have the ability to continue to borrow moreÖin other words, raise the debt ceiling.
One of the most important areas that could be affected by this is Social Security. If an agreement is not reached by August 2nd, then Social Security payments are in jeopardy. This is because our government will no longer be able to borrow money but yet more money will continue to be spent, with no money coming in.
So what can happen if we default and we reach our limit? The stock markets could potentially crash.
Unfortunately the entire issue has become political. So you have one party against another. The Tea Party is not completely against the idea of a crash because some believe it will force reorganization of our system. They play an important role because Republicans donít want to risk the loss of votes by those in the Tea Party.
In the past the debt ceiling has been raised 18 times by Ronald Reagan and 7 times by George W. Bush. It would help our country to do it again but there are other things that factor into this whole debate.
Letís look at what Obama and the Democrats want. They want to see the debt ceiling raised. He wants to see us live within our means and make ďseriousĒ government spending cuts, asking the wealthy and corporations to give a little. This would reduce the deficit by 4 trillion dollars.
The problem with our administration is that in an effort to help the poor, they are spending us into oblivion. Entitlements, which are basically financial support to those in need, are their answer to helping the poor. Yet statistics show that despite spending massive amounts of money on entitlement programs such as Social Security and Medicare, the poverty rate continues to remain steady.
Republicans on the other hand, want to see much deeper cuts and no tax hikes to those in the top income scale. They would like to see for every dollar the debt ceiling is raised, the same amount in cuts being madeÖeven better, they would like to see the cuts be greater than the raising of our debt ceiling.
We also have to consider that despite the trillions of dollars being spent on entitlements, not only has the poverty level remained the same but we are also in a serious job slump. Clearly the spending in government isnít working.
So as August 2nd looms closer, we Americans are left to sit back and watch the embarrassing, political fight over our future. It is in the hands of the government with two sides that want to win. Yet in the end, Iím not really sure there can be any winners.