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Fundas |
 Taming America's Debt Monster |
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For a time it seemed safe for many people going about their summers to try to ignore the debt ceiling drama playing out in Washington. If Wall Street had not seemed overly concerned that the United States was headed toward default, why should anyone else worry? And there is the long history of crying wolf in Washington: in April everyone finally got up to speed on the threatened shutdown of the federal government just in time to see it averted by an 11th-hour deal.
Federal law requires Congress to authorize the government to borrow any money that is needed to pay for the programs that Congress has passed. As the national debt has grown, the Treasury has periodically bumped against this debt limit or debt ceiling.
The US Government runs a budget deficit that lets it spend more each year than it raises in tax. The credit limit – or debt ceiling – is set by Congress. If it is not lifted by August 2, the US Treasury runs out of funds to meet regular payments like social security benefits, military pensions, contractor payments and interest.
The country will not be able to run itself.
The US has had public debt since its inception, which has escalated in more recent times to fund significant expenses like wars and stimulus packages; every president since Harry Truman has added to the total.
The debt ceiling has been raised 74 times since March 1962, including 18 times under Ronald Reagan, eight times under Bill Clinton, seven times under George W. Bush and three times to date under Barack Obama.
Votes to raise it are among the least popular things Congress does, but the limit has been raised dozens of time, generally with little fanfare. But in 2011, the debt ceiling became the central battleground for conflict between the Republicans who took control of the House in the 2010 elections, and President Obama and the Democrats who still control the Senate.
In May, the Treasury Department said that the debt limit of $14.29 trillion had been reached, but said it could keep the government functioning normally by "extraordinary measures'' that would run their course
by Aug. 2.
By the end of July, increasingly bitter talks still continued, as an event that had once seemed unthinkable — a default by the federal government — loomed only days away.
Late on the night of July 31, President Obama and Congressional leaders of both parties announced an agreement that would raise the debt ceiling by up to $2.4 trillion in two stages, enough to keep borrowing into 2013. The pact called for at least $2.4 trillion in spending cuts over 10 years, with $900 billion in across the board cuts to be enacted immediately.
To put pressure on, a "trigger'' was adopted that meant a failure by Congress to enact those cuts would lead to across-the-board cuts in military spending, education, transportation and Medicare payments to health care providers.
Large portions of both parties were unhappy with the plan — Democrats opposed it because it cuts spending deeply without raising revenues, while many in the Tea Party wing of the House Republican caucus were against any increase in the debt limit
Raising the debt ceiling is normally routine but Republican members, particularly hard core allies to the Tea Party movement, have used it over the last month to hold the White House hostage.
The Republicans want a short-term solution of spending cuts without any of the tax hikes or welfare decreases proposed by the Democrats.
Tax has become an increasingly hot topic in the US with the rise of the far right “small government” Tea Party.
Finally the Senate voted on Tuesday to raise the government’s debt ceiling and cut trillions of dollars from its spending, concluding a long and fractious partisan battle just hours before the government’s borrowing authority was set to run out.
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