I am one of those who does not understand how we can keep raising the debt ceiling, continue to go further in debt, but be ok.
That's OK. It's just a case of ignorance. The national debt is simple to understand. let me outline a few concepts for you.
Simply put, revenues are the sum of all income for the governmet, for taxes, fees, and income from any sales of
government property. These are determined by laws set by congress and the course of events; for example, the congress sets the income tax, but the
course of events determines people's incomes.
Expenditures are the sum of all the things government spends money on: Social Security, Medicare, Military, Grants
to state governments, et. These are determined by acts of congress and the course of events. For example, congress determines federal funding for
unemployment benefits, yet the course of events determines how many people are unempoyed.
Given as an equation,
Deficit(for the year) = Revenue(for the year) - Expenditures(for the year). Deficits by law must be made up by borrowing. This is accomplished by
selling government bonds, which may be redeemed by purchasers for a higher value later.
5. This Years Debt
is simply (last year's debt
) + (this years deficit
6. The Debt Ceiling
is a maximum limit on the amount of outstanding bonds that the Government can have sold but not paid off at a
given time. It is set by act of Congress.
You'll notice that the debt ceiling, paradoxically does not limit the debt in any way. The debt ceiling is a limit defined b y act of congress as to
the maximum borrowing that the government may do by selling bonds. The difficulty comes when the debt ceiling laws conflict with the laws concerning
revenues and expenditures. If the Debt exceeds the Debt Ceiling, some law is going to have to be broken, either revenues must be generated contrary
to law, expenditures must be cut contrary to law, or debt must be issued contrary to law. For this reason, customarily, the debt ceiling has normally
been raised every time the debt comes near it- otherwise the laws will be in conflict.
Unfortunately, many people misunderstand the situation by assuming that the debt ceiling causes the debt to increase. This is false. The debt
ceiling is a redundant law, because the debt is mostly controlled by acts of congress anyway. Laws that are contradictory will give the president a
free hand; since he cannot obey all of them, he must choose which to obey.