Wednesday, October 6, 2021

What is the deal with the Debt Limit?

Without making value judgements (which is going to be damn hard here) this is the deal with the debt limit.

Congress passes legislation to do something, spend on the military, expand child care, whatever. This legislation costs money. BUT Congress doesn't have to account for the money - they just say how to spend it. 

It is equivalent of your family deciding to buy a new Mercedes, but then not paying for it after the first year.  This is unique to the us. Nearly every other country in the world agrees to raise the money for what they have allocated. The United States does not. 

So, in the United States, Congress tells the government what to spend money on or what tax breaks to give out. But then the Treasury (not Congress) has to raise the money. And they are only allowed to raise the difference between what Congress spends versus what the IRS takes in - by issuing debt. So the debt limit is increased ONLY to enable the spending that was already allocated.

Both Republicans and Democrats have played by these rules since 1917*. And in each instance raised the debt limit to take care of what they already agreed to spend. But under Mitch McConnell, first under Obama and now under Biden, the Senate refuses to raise the debt limit to cover what Congress already agreed to spend. (It is one of those things that needs 60 Senators to agree.) 

I say it is hard to NOT blame Republicans because Democrats are adults and raise the limit even under Trump and Republican leaders. Republicans are willing to threaten the United State's credit only to score points. They believe that, if only the Democrats vote to raise the debt limit, the Democrats have to defend the 7 TRILLION in debt that passed under Donald Trump.

And, with their base of vaxxine and election denying voters - they may be right. But with those anti-truth voter, Republicans and FOX could just as easily vote to raise the limit and still blame Democrats.

You may ask...What happens if the debt limit isn't lifted on time. The same thing that happens if you don't pay your bills on time. Your credit sucks and you have to pay more in interest. Since we have $trillions in debt, a raise in interest hits us all.

And there you have the debt limit discussion in a few easy to read paragraphs.


*More Information re 1917: Prior to this, the Congress did say where the money was coming from. But during WWI Congress agreed to let the Treasury issue War Bonds to raise money without their authorization. In order to limit how much was raised, they passed a debt ceiling.

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