In an interview on MSNBC’s Last Word tonight, Senator Bernie Sanders (I-VT) blasted Republicans for “bully” tactics on the issue of raising the debt ceiling. He urged President Obama to stand tough because enough was enough. He accused the Republicans for saying that if they don’t get their way 100%, they will tear the whole house down referring to their threats not to raise the debt ceiling unless it is under their terms.
The debt ceiling was raised seven times under Bush by a Republican Congress.
Speaker Boehner (R-OH) and Majority Leader Eric Cantor (R-VA) have stated that they will not raise the debt ceiling unless they get $2.2 trillion dollars in budget cuts first. Most economists believe this is like playing with nitro glycerin.
What is the debt ceiling and why is raising it so critical?
Under Federal law, the United States may not borrow funds—even from itself, in excess of the amount specifically authorized by Congress. That amount is currently $14.294 trillion dollars.
As of May 10, 2011, the debt was just $14 billion shy of reaching the limit. When the limit is reached, the government can not borrow money by issuing bonds, T-Bills, or even borrow as it does weekly from the Social Security Trust Fund and other government funds.
Congress has already passed bills that require the ceiling to be raised to fund the laws it passed. An example is the extension of the Bush tax cuts which costs $856 billion with only $14 billion left to borrow. However, the Treasury Dept sold $56 billion in T-bills today technically putting the country over the limit already.
Failure to raise the ceiling is the same thing as a homeowner who takes out a mortgage requiring them to pay $856 a month, and then they only pay $14 instead of $856 each month. The result would be foreclosure.
If the ceiling is not raised, the government will default on its loans, bonds, and other obligations. The impact of this would be disastrous and most experts feel it would set off a global recession. At a minimum, the dollar will collapse, and our credit rating would tumble.
See video to the left for an explanation of the debt ceiling by Reuters.
Won’t raising the debt ceiling increase the deficit?
No. This is rhetoric that Republicans and others who are opposed to raising the debt ceiling use to support their position, but it is not true per se. The debt ceiling just authorizes the government to pay the bills that it already owes. These bills include the costs of the wars in Iraq and Afghanistan, the Recovery Act, oil subsidies, agricultural subsidies, and the extension of the Bush tax cuts. Except for funding things Congress already approved, not one cent of additional spending will happen without a vote of Congress and the signature of the President. Only Congress can appropriate funds. A debt ceiling is not an appropriation.
If the Republicans do not want to increase the deficit, they only need to stop passing legislation that is not paid for and therefore increase the debt. They do not need to tear the house down, as Senator Sanders put it, by failing to raise the debt ceiling. They just need to exercise restraint when it comes to handing out subsidies and tax cuts that are not paid for.
Opinion polls show that a majority of Americans oppose raising the debt ceiling, but a majority indicates that they approve of the Presidents handling of the economy. Perhaps it is because the public believes raising the ceiling automatically raises the debt.
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