Post # 100 ( 🙂 )
While I was on Facebook, a discussion broke out on the debt ceiling. I made this following response to a comment;
this makes no sense to me “Raise the debt ceiling–not to spend more–but to pay off debts already on the books” If it is already on the books, then why would you need to raise the debt. My debt doesnt go off when I pay it off it goes down, so this makes no sense to me.
It was pointed out that I didn’t understand what the debt ceiling was. I share this because I am sure other people had the same mis-conception that I did. So I decided to do some research. I first went to Wikipedia, but I don’t strictly trust them. So I search a little more and found the web page http://www.investopedia.com. They defined the debt ceiling as this:
The maximum amount of monies the United States can borrow. The debt ceiling was created under the Second Liberty Bond Act of 1917, putting a “ceiling” on the amount of bonds the United States can issue. As of the end of July, 2011 the debt ceiling was set at $14.3 trillion.
Also known as the “debt limit” or “statutory debt limit.”
And they explained it as this:
Before the debt ceiling was created, the President had free reign on the country’s finances. In 1917, the debt ceiling was created during World War I to hold the President fiscally responsible. Over time, the debt ceiling has been raised whenever the United States comes close to hitting the limit. By hitting the limit and missing an interest payment to bondholders, the United States would be in default, lowering its credit rating and increasing the cost of its debt.
There has been controversy over whether the debt ceiling is constitutional. According to the 14th Amendment of the Constitution, “The validity of the public debt of the United States, authorized by law … shall not be questioned.” The majority of democratic countries do not have a debt ceiling, with the United States being one of the exceptions.
Now that you got some background to what the debt ceiling is, how does this impact our current situation. In a previous post, I blamed both sides and the President for this situation. Even after doing this research, I believe even more that everyone is to blame.
First let us deal with the issue – is it constitutional? I don’t know. If it was up to me, It would not exist. I understand that it was designed to keep spending in check, but it is a really bad attempt at doing it. You can also see that it was designed by law makers who don’t want to be held responsible for out of control spending. The way this is designed is that spend out of control now and make someone else responsible later. Because it is not the debt that will eventually kill the debt ceiling it will be the interest racked up by the debt. So even though it was designed to keep spending in line – all it does it keep us from paying our debts and every time it gets raised, more out of control spending happens. It is a complete failure. And it makes America look weak. America should never have the perception that we can not pay our debts.
But something has to be done. America is in trouble and while I disagree with the Republicans that this is the time to fight this battle. A battle must be fought. But Congress and the Senate and the President are not the ones to solve it. Why, because that would be like asking a drug addict to come up with a solution to get clean. That is how we came up with the debt ceiling in the first place.
So what is the solution. My solution is that we must balance the budget and restrict the debt to 20% over budget. We will give 20 years exception starting next year. By year 2019 the debt limit will be reduced to 15 trillion dollars, with every year after that it will be reduced by 1 trillion dollars, until we reach that 20% over budget number. Every fiscal budget will have to have long-term plans that meet those goals, and any new spending would have to be paid in full. For every dollar over budget, each senate member, congressional member and the president would be fined $.10. For everyday after the budget deadline that there is no budget – every senate member, congressional member and President would be fined a week’s salary. Also taxes can not be raised more than 10% total in any given year, so that it is not financed on the backs of Americans.
Why am I being so harsh? Because as a football fan, I always want my team to go out and spend all this money and get mad at them when they don’t. Point is that when it is not your money that you are managing, it is easier to spend without consequences. But when your money is at stake, you become more wise. So they will have to be creative and work with each other. That means that cuts will have to be part of the solution (which will upset Democrats) and tax loopholes will vanish (which will upset Republicans). It also means we might have to re-evaluate current programs like social security and medicare and even Obama care. Before you get all upset, I did not say get rid of these programs, but you will have to go over them with a fine comb and try to make them as efficient as possible, and as cost efficient as well.
If we don’t deal with this issue now and deal with a lot of pain that will come now, there will be a point where it wont matter that we can extend the debt ceiling because we will just be broke. There will be a point and I fear it is coming closer each day that we can’t print or borrow our way out of it. Yes the debt ceiling is about paying our debts, but the interest is killing us and is only going to get worst, we need to start paying some of the debt that we can back early to get rid of the interest. Some debt is healthy, this is not. We can’t be like we have been, pushed debt and its interest on the next generation. That being said it is congress, senates and the President failure. Shutting America down is a cowards way of doing something and accomplishes nothing. If the President was a true leader, this is something he would be talking about, not pointing fingers.
and the journey continues…..
- Why Have A Debt Ceiling If It Has No Consequences? (crooksandliars.com)
- More on the Budget Battle and Debt Ceiling Consequences (reasonablymoderate.wordpress.com)
- The looming debt-ceiling catastrophe (cjr.org)
- Americans Want Big Spending Cuts Before They’ll Agree to a Hike in the Debt Ceiling (reason.com)