Essay On Debt Ceiling
According to the U.S. Department of the Treasury debt limit or debt ceiling is “the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments”. This is very similar to a person’s credit card, wherein he is given a credit limit which he should not exceed. The debt ceiling was created in 1917 through the Second Liberty Bond Act. Since 1960, the debt ceiling has been raised 78 times already to avoid a scenario of loan defaults by the government and failure to pay interests rates on bonds.
There are several reasons why a debt ceiling is important. First, a debt ceiling is necessary because it gives a limit to the Treasury as to the amount of debt it can incur. This means that the Treasury does not have to ask the permission of Congress every time Treasury enters into a debt; that is, as long as it does not exceed the limit. If there is no limit set, the country will be at risk of default; thus, will no longer be financially stable.
A debt limit is vital because it affects the life of every American. If the debt ceiling is reached, interest rates on mortgages and loans will significantly increase. Spending on vital social programs may also be cut.
Debt ceiling is imperative because it prevents the tendency of the government to over spend. Furthermore, with a debt ceiling in place the authority to borrow does not fall in the hands of the President alone or the executive branch.
Having a debt ceiling is crucial for the economy. It is a way of controlling not only federal borrowings, but also essential to regulate federal spending.
U.S. Department of the Treasury. "Debt limit." 17 March 2015. www.treasury.gov. 9 April 2015 <http://www.treasury.gov/initiatives/Pages/debtlimit.aspx>.