Fixing the Debt Ceiling.
Much has been made over our impending debtpocolypse that will occur if the Congress doesn’t raise the Congressional debt limit by August 2nd, the date given by Treasury Secretary Geithner, that the country will run out of money to obligate our payments. Although some question the date given by Geithner, and the effect of us defaulting, Congress and the White House have been working towards a deal to raise the debt limit.
What is the debt limit?
The debt limit is basically how much Congress allows us to borrow. A statutory limit has been placed on our debt as part of the Second Liberty Bond Act of 1917 which allowed us to finance World War I. Right now it’s at about $14.6 trillion dollars. Meaning the federal government has borrowed $14.6 trillion dollars that we haven’t paid back yet.
Total debt of the federal government can be increased in two ways.
- Either selling debt to the public, normally secured through US savings bonds (Those birthday gifts you probably received and were upset by as a kid. “Happy Birthday Little Johnny, here’s $100 in a US Savings Bond. You can’t spend it for another 20 years but it draws interest and will be very valuable by the time you forget you have it.”),
- When the federal government issues debt to certain government accounts such as social security, Medicare, and transportation trust funds.
As of right now
- commercial banks and credit unions hold about $269.8 billion,
- insurance companies hold about $260.8 billion,
- the UK and state and local governments have about $511 billion each,
- mutual funds hold about $637.7 billion,
- Pension funds worth $706.4 billion,
- Japan has traditionally been one of the largest US debt holders with $877.2 billion,
- China is the largest debt holder at $895.6 billion,
- $1.5 trillion is held by individuals, businesses, estates, corporations, and non-corporate business,
- and $5.351 trillion is actually held by the US Government (yeah the biggest holder of government debt is the federal government… go figure).
Even when Democrats took back the House during the final 2 years of the Bush Presidency, the debt limit was raised three times with a combined 136 Republican yes votes.
Between 2000 and 2008 the debt ceiling went from $5.9 trillion to $11.3 trillion. Since Obama has been in office the debt ceiling has been raised 3 times, with not a single Republican yes vote.
Stay Tuned for Part II