A lot of people say I post a lot on the book. They are right. I don't want the book to be a place where I crowd people's news feed when I mainly want to use it to stay connected with my friends. So I decided to switch to this. Keep that in mind if you plan on following me.
“The United States debt-ceiling crisis was a financial crisis in 2011 that started as a debate in the United States Congress about increasing the debt ceiling. The crisis ended when a complex deal was reached that raised the debt ceiling and reduced proposed increases to future government spending, although similar debates are possible for future budgets.”
Apparently that (the raising of the debt ceiling and the reduction of the proposed increases to future government spending) occurred in August of 2011. To help understand debt limit I watched this fun video, because reading is so fucking lame. http://www.youtube.com/watch?v=Li0no7O9zmE
There are also some numbers at the end that explain how the video relates to the Federal Budget. For a straight forward explanation, check this video out. http://www.youtube.com/watch?v=aI66ayr6UNk
Also this clip from Newsroom. http://www.youtube.com/watch?v=CvWO_xLwQX8
So what it seems to mean to me is that the debt ceiling is the limit of how much can be borrowed to pay off debts and pay for spending. To me that doesn’t really make sense, but I could just not be seeing it. It seems like ‘This is the limit we can become more in debt to pay off debts and pay for our spending.’ You still have straight up, negative money, but it seems like voting against the raise would destroy the value of the dollar, making American money worthless to everyone, thus making it more difficult to pay off other countries.
Another thing: The money borrowed, and the amount that can be borrowed, comes from the Treasury. The department in charge of:
The basic functions of the Department of the Treasury mainly include:
So am I to understand that you borrow money from yourself, to pay for your shit? This department collects money from taxes (point 2) to pay the bills of the US (point 3). In the third video I posted it explains that congress needs to spend money so it uses its own or borrows from the treasury, and the treasury gets its money from taxes and other borrowing. What confuses me as (as an idiot who doesn’t understand how countries work, and hopefully I’m not alone) is where any of this money is coming from. Why does congress need to borrow? How does it have its own money? Why does it need to ask for money from the treasury if they are both under/part of the government? Where is the money (that isn’t from the taxes) coming from?
I hope that these are questions that many people have and need answering so please post replies or email/tweet me about this.
Midway through writing this (now) I realized that I am entirely uneducated on this topic and wish I had paid more attention in my Politics and Economics classes back in Highschool.
Anyway,some more info. The ceilings are raised to prevent the country from going into a ‘Default’ or ‘Sovereign Default’ which means they are unable to pay back debts… or something like that. This can cause the value of their currency to drop (as mentioned before), and prices on everything to raise (which is inflation…right?). So when a default occurs, a counties money becomes devalued, taxes must be raised and prices inflated to try and generate more currency. aka “We can’t borrow any more, so we gotta make more money and spend less.” Which seems like a smart thing on the small scale, I never do this but if I maxed out my credit card, I’d have to spend nothing for a while to make the money to pay off my card.. so I could use it again later. But for a country and its people it would suck to do that IN A RECESSION. The one time where you can’t afford to spend less, because you barely have any money for food and rent. (This is when you use other credit cards, or someone else’s money, to pay off your own credit card or other bills.) Which I guess is the equivalent of raising the debt limit/ceiling. (this is shown in the first youtube link, the satirical comparison between raising one’s own debt limit to the country’s debt limit.
Note: The previous section about Sovereign Default is mostly stuff I learned from this page: http://en.wikipedia.org/wiki/Sovereign_default
Check out in particular what can happen to some countries when they default:
“Nonetheless, governments may face severe pressure from lending countries. In the most extreme cases, a creditor nation may declare war on a debtor nation for failing to pay back debt, in order to enforce creditor’s rights. For example, Britain routinely invaded countries that failed to repay foreign debts, invading Egypt in 1882. Other examples include the United States’ “gunboat diplomacy” in Venezuela in the mid-1890s and the United States occupation of Haiti beginning in 1915. A government which defaults may also be excluded from further credit and some of its overseas assets may be seized; and it may face political pressure from its own domestic bondholders to pay back its debt.”
But seriously, who would be willing to take on America in a war over debt. Who would even have enough fire power. (http://www.globalfirepower.com/) and who even own’s America’s debt (http://www.guardian.co.uk/news/datablog/2011/jul/15/us-debt-how-big-who-owns)?
Good thing America is only borrowing from 6 of the top 30 Countries to have the most powerful military after it. If those 6 countries decided they wanted all of their money back from America all at once, America could probably take it right? Not like a superpower has ever been defeated by the cooperation of several countries who all agree to attack it at once right? Oh wait… (Superpower Germany taken down in WW1 and WW2 by the cooperation of several countries who agreed to fight it with their combined military forces. Duh.)
So its probably good that they didn’t let Sovereign Default occur. But what was the aftermath? Well apparently America’s credit rating (A credit rating evaluates the credit worthiness of a debtor, especially a business (company) or a government. It is an evaluation made by a credit rating agency of the debtor’s ability to pay back the debt and the likelihood of default. - http://en.wikipedia.org/wiki/Credit_rating) dropped. Which means… fuck if I know. I’m just getting my info from http://en.wikipedia.org/wiki/United_States_debt-ceiling_crisis and I don’t even know how accurate this is. Apparently stocks dropped, faith in America’s economy dropped, the debt is now MUCH higher (like it wasn’t higher already?) than the GDP which is like saying “the amount of money I make will NEVER be equal to the amount of money I owe.” So still pretty bad, but not as bad as being invaded by 6 countries over money.
Lastly, the debt ceiling debate was resolved in August 2, 2011, when this happened: ”The Budget Control Act of 2011 (Pub.L. 112-25, S. 365) is a federal statute in the United States that was signed into law by President Barack Obama on August 2, 2011. The Act brought conclusion to the 2011 United States debt-ceiling crisis, which had threatened to lead the United States into sovereign default on or about August 3, 2011.” The page BTW is http://en.wikipedia.org/wiki/Budget_Control_Act_of_2011 if anyone needs in depth info and proof of sources which I may not provide. Interesting point “The President could request a further increase of $500 billion, which is subject to a congressional motion of disapproval which the President may veto, in which case a two-thirds majority in Congress would be needed to override the veto.” That’s after the immediate $400 billion. And the president has VETO (“fuck off, I’m doing it anyway even though I was outvoted”) power over a 51% vote. Meaning unless 66.67% turn him down. He can increase the ceiling EVEN MORE. Now I get that you need money for shit now, and you will need money for even more shit later, but DAMN SON, that’s a lot of money you’re taking from your dad’s credit card, which is actually owned China, India, and Japan. You sure you can pay that back?
Note that the second section of that page (called Deficit Reduction) has these two extremely interesting points:
First point explains the second point. They plan on spending much less and cutting money from some places or things to raise/save/earn/whatever $917 Billion over the next 10 years, and since they only plan/hope on taking $900 Billion, its totally cool. They are going to have 17 billion left over. BTW the US is like over $16 Trillion in debt, so 17 billion is almost NOTHING. That still has to go toward the overall debt. Numbers too big? Take away a few 0’s. You $16,000 already. And you want to take another 900 or make it so that you CAN take it out should you need. You justify it by saying that you will make $917 in the next little while. Your bank should look at you like you’re a fucking idiot. Pay off that damn $16,000 first before you take more money. (But banks wont do that because when you’re in greater debt they can charge more interest and in the end you end up paying more than you ever took out.) You then add that by taking this $900 dollars, you are going to invest it or use it to fund things that make you EVEN MORE MONEY (which is what I figure the US plans on, or at least I hope they do).
Those are pretty much the main points of the Debt Ceiling Crisis. (I know I’m getting into this thing like a year late, but its still important!) My stance, if at all unclear, is that I agree that it should be raised, and I agree that all these cuts to spending should occur, but I also agree that taxes should be increased (especially on the rich) and prices should inflate a little, as to generate more money to be put toward paying back the debt.
What I’d like anyone who has read this far to do is tweet or tumble reply/post to/on my page(however you do that, I still don’t know) your stance on the issue, and correct me if I was wrong in anything I wrote about, and what you would have done differently or the same if you were in the position to do something about the overall National Deficit or the Debt Ceiling.
Thank you for your time.