1. What is the debt ceiling?
The debt ceiling is the total amount of debt the government can have. It's currently $14.3 trillion dollars. If the government wants to borrow more than this amount, the debt ceiling must be raised by Congress in a law signed by the president. That's been done 73 times since the debt limit was imposed back in 1917.
2. Why did this happen?
The government spends more money than it takes in, and is forced to borrow the difference, which is known as the "deficit." Until Congress and the president get overall spending under control and balance the budget, borrowing will continue and the debt ceiling will need to be raised.
3. So, if they don't reach a deal, will we be evicted from our home because we can't pay
the bills? We only have our Social Security and military retirement and just make it now. I don't know what we will do if nothing comes in.
Not necessarily, but it is a possibility. If the debt ceiling isn't raised, the government won't run out of money. It will still have income, in the form of taxes withheld from American paychecks, import duties, corporate tax payments, etc. But since the government spends more than it takes in, it won't have enough money to pay all of its bills. The president and the Treasury Department will have to pick and choose which to pay, and which not to pay. If they pay interest on the debt – which is likely to avoid defaulting – they will be unable to pay, say, military salaries or federal contractors. The desire to avoid making those difficult choices is one reason leaders are trying so hard to resolve the situation.
4. I also heard that the Treasury could print money and the Fed could buy it back once
it goes into circulation. That seems like putting a band aid on a shotgun wound...but I'm
sure there are alternatives to get us out of this mess without having a global financial
meltdown. Is this true and what would the alternatives be?
That is a possibility, but not a realistic one, due to the inflationary effects it would cause. Because the debt is a creature of politics – it was created by Congress and has been raised by Congress scores of times under both Republican and Democratic presidents – a political solution is best. As the Aug. 2 deadline nears, pressure grows on Republican and Democratic leaders to reach a compromise.
5. How is this debt crisis different from an individual's personal debt crisis with credit
cards?
It's slightly different, because Congress has already authorized the spending that's pushing the debt limit higher. PoliFact explains thusly: "The debt limit is in some ways a moot point, because the spending that pushes the debt limit higher has already been authorized by other legislation. Though the debt ceiling is a high-profile vote, it's not a cause of spending, but a result. Still, it's important. Failure to raise the debt limit and cover the nation's debts would be unprecedented in American history, [Treasury Secretary Timothy] Geithner has said, and could shake up international markets." To compare apples to apples, it would be as if you went on a spending spree, and need to raise your credit card limit to pay the bills you'd already incurred.
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