Tuesday, April 19, 2011

What is debt ceiling

As the debt ceiling is about to be broken, I am interested in what is the debt ceiling.  Debt is money or goods or services owed by one person to another. The US national debt ceiling is a limit set by Congress beyond which the national debt cannot rise; periodically raised by Congress. The current debt ceiling is $14.294 trillion.

The U.S. Treasury Department now conducts more than 200 sales of debt by auction every year. The Treasury has been granted authority by Congress to issue such debt as was needed to fund government operations as long as the total debt (excepting some small special classes) does not exceed a stated ceiling.
The most recent increase in the U.S. debt ceiling to $14.294 trillion  was signed into law on February 12, 2010.

The graph belows show that actual debt has broken the limit but debt used for reporting purposes is about  to break the debt ceiling

The last time the debt ceiling was broke was in 2004 and currently congress is considering whether and how much to extend the debt ceiling again.

Instead of continually raising the debt ceiling congress should consider two two options of raising taxes and reduce spending. The current option of devaluing the US dollar will only mean more debt is needed which will have to be paid back through revenue.


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