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Old 10-16-2013, 08:41 PM   #76
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Okay, so I'm curious to know how the debt ceiling works. Is there a specific amount that it can be raised and what prevents them from basically giving themselves a $1 Quadrillion limit as opposed to the $1.5 Trillion or so that it's currently at?

Serious question. Never really paid much attention to this sort of stuff in school.
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Old 10-16-2013, 09:25 PM   #77
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^^ I am not 100% sure but here is an example.

In simple terms is like us(regular people) borrowing money from the bank to pay for your everyday needs (food, gas, bills.....). Since the money we make can't cover it we keep borrowing more. Example a year ago with our income we can pay 50% of the principle of what we borrow back, but this year we borrow more from the bank so we are only able to 30% (coz we borrow more so less is going towards the principle and more is going towards interest.). Soon if we keep borrowing money there will come a point when what we make won't even cover the interest and that's when we have to default our loan (going bankrupt). Now that we are bankrupt all of our assets are being sold to cover the loans and also our credit are ruin for a good 7 years.

So to avoid this form happening we try to spend less (less eat outs, cuts our cable, cell phones......)and hoping that with decrease spending we can pay more interests back. If a person claims bankrupt it doesn't affect the world too much (heck it won't even affect the community where you live).

What the debt ceiling does is to prevent the gov from spending more (or borrowing more to cover the spending of the gov). Also the more US borrow, the higher interest they have to pay and their credit score gets lower. I believe it also increase the amount of debt each current and future US citizen have on them. So having a high debt ceiling isn't ideal as they are just borrowing money to pay for their spending and interest to the money they own.

Since so many countries borrowed money to the US if the US goes bankrupt (default their loan). These creditor will be at a lost........ and that will really affect the world economy. However, no ones want to see that happening. Honestly though is hard to say what's right and what not. If the US gov cut spendings and social programs it will affect a lot of Americans and it might even cause the US to go into depression. At the same time keeps borrowing money isn't the solution, it is only a band aid solution.
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Old 10-16-2013, 10:00 PM   #78
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^What about the option not discussed, which is to raise income?

Not via taxes, but perhaps another option?

Genuine question, because yours was the best fucking explanation I've seen yet.
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Old 10-16-2013, 10:02 PM   #79
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Originally Posted by Lomac View Post
Okay, so I'm curious to know how the debt ceiling works. Is there a specific amount that it can be raised and what prevents them from basically giving themselves a $1 Quadrillion limit as opposed to the $1.5 Trillion or so that it's currently at?

Serious question. Never really paid much attention to this sort of stuff in school.
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Old 10-16-2013, 10:02 PM   #80
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^^kind of.

People get caught up on debt as a number, because it seems big in relation to money that most people deal with.

So "oooh scary number 17 trillion dollars think of the children ooohhh" its not bad. It's like borrowing money to buy something that makes you money. Who cares what the payment is, as long as it brings in MORE money than you pay out. So you buy infrastructure and help poor and, well, for the americans, you buy a shit load of military stuff. can move people and goods, and not trip over dead poor people and you keep your industry in business and take all the underprivileged kids out of their neighborhoods and educate them, and occasionally some of them don't come home.

So its measured against GDP-Gross Domestic Product.

For the US? U.S. National Debt Clock : Real Time Everything you need.

It's hovering, according to that at about 100%, meaning all the economy in a year could wipe the debt. Canada is 64%. Ireland is 1000%, and they are still going.

These numbers don't include unfunded liabilities which is the sum total of every dollar they as a country have agreed to pay, but haven't actually found the money to do. That's about 60 trillion.

Why do people care?

It never seems to go down. The closest in recent times is Clinton, and even he swapped deficit money for more unfunded liabilities to do it.

The interest payments get higher to service the debt. That's a more important number as you have to deny your citizens use of their money in terms of paying out interest on money used for foregone expenses.

Why people shouldn't care

Ultimately, the best is to at least have a balanced budget, and only go into deficit during times of economic distress(much like Canada did). The US is the reserve currency, in the largest economy in the world by far. They kind of don't need to play by the same rules, as they just...don't. Create a war, and their economy prospers. Create peace...and their economy prospers. Buy some gasoline, and chances are...their economy prospers.
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