The $17 trillion debt ceiling needs to be raised or America will hit a massive default. President Obama had already said that he wants a no-strings-attached deal because he will look for opportunities to use his executive powers to carry out his agenda. This debate coming up is important and some people do not even see how this will determine the fate of our country’s economic state.
For a better understanding, the United States splits the financial responsibilities. One half goes to the president, and the other half goes to congress. The president basically has two responsibilities when it comes to money. He collects the taxes from the citizens and then he spends the taxes in order to run the government. This is why people believe that he has all the power; he also convinces the people he has this power through his campaigning, saying he will raise or cut taxes. In reality, this is not true.
The president is the one who takes orders from Congress. Congressional responsibilities include setting the tax limits and determining how much of it the government will spend by writing a budget. The president can send a budget to Congress asking about certain budgets, but Congress does not even have to pay any attention to it. Congress can add to, take out, throw it away, or entirely write a new one. The same goes for the level of taxes. They decide what they want such as warships, robots, armored vehicles, bridges, and they put it in the budget.
The president by law must purchase what congress has put on that budget and use the taxes the budget that they had set. As long as the taxes go in the budget and the expenses come out, then everything should balance. But almost always the government will spend more money than it takes in, now more than ever. Mandated spending is more than the taxes raised because they put more stuff that they want in the budget than they have taxes to cover. This means that the president must borrow money to cover the difference by selling bonds to investors around the world. Half of it is held by foreigners, mainly China and Japan. The debt ceiling must be raised or America’s credit will default and the investors will raise interests on the bonds.
Congress limits the amount of the debt the U.S. can have. As the money borrowed draws nearer to the debt limit, they point to the president. The president has borrowed this money that congress has forced him to do by approving a budget the president is forced to spend without considering necessary taxes to cover that spending. The debt limit is about paying bills already used. When the government reaches the debt limit, they cannot pay the people who have worked for them and are expecting to get a paycheck. These payments include Medicare payments, Social Security, soldiers, and even road workers. These people would be forced to make due for quite some time, which is called a sovereign default. If this happens, then Americans will have a huge trust issue with the government.
Since a large part of the global economy depends on the dollar being trustworthy, messing with that trust could be devastating. That is why congress has the “solution” of raising the debt ceiling, which they have always done. The reason why it takes months to debate this issue, is because the debt limit is not in the constitution. Congress created it themselves and because they did so, they believe it is an amazing concept. This makes it so they can create a problem that they can blame on the president who needs the solution only they can provide. Congress can use the threat of a future financial economic collapse as leverage in negotiations. It is either make sure the debt ceiling is raised, or prepare for the risk of a huge default on the U.S. credit.
By Brittany Varner-Miller