| Aielyn said: I need to correct you first on a major misunderstanding that is really common amongst Americans, and that you've shown in this post. The debt ceiling isn't about giving the government the ability to borrow more money. It's about giving the government permission to pay off the debt. I don't know the finer details of it, but public debt will continue to increase with or without raising the debt ceiling. TFurthermore, public debt doesn't devalue the American dollar. Two things can devalue the American dollar - reduction in investor confidence, and more American money being printed. The latter is something the government can control directly and causes massive inflation, the former is something it can only influence through policy and enactment of laws. The argument from anti-tax crusaders is that investor confidence will increase if you decrease taxes. But the thing is, decreasing taxes will make the deficit (and therefore debt) problem worse, which will massively depress investor confidence. The unwillingness of government to do what needs to be done is also depressing investor confidence - politics over policy is bad for the economy (hey, that almost rhymes :P). Decreasing spending in the short term is going to have to happen, as I already noted. Part of the reason for this is that public debt is larger than your GDP, which means that even if the government could take every single dollar from the economy for a year without destroying the country (and pretending that the economy itself wouldn't disappear within days of beginning this), it still would not be enough to completely pay off your debts. But large amounts of spending cuts will also be devastating to the economy. Even if you ignore the rest of the economy, government spending is part of it, and with a GDP of around $15 trillion and spending of around $3.6 trillion, you'd see a GDP decrease of at least the order of 20% if the government ceased all spending. That's well beyond a depression. Of course, this is a case of reductio ad absurdum, but I think you get my point. Oh, and I may seem knowledgeable about economics, but it's more that I'm very knowledgeable in mathematics, and am able to apply reasoning to economics. All of the finer details, I wouldn't have a clue about. Which is why I speak in terms of the broader details. |
Under US law, an administration can spend only if it has sufficient funds to pay for it. These funds can come either from tax receipts or from borrowing by the United States Department of the Treasury. Congress has set a debt ceiling, beyond which Treasury cannot borrow. The debt limit does not restrict Congress’s ability to enact spending and revenue legislation that affects the level of debt or otherwise constrains fiscal policy; it restricts Treasury’s authority to borrow to finance the decisions already enacted by Congress and the President. Congress also usually votes on increasing the debt limit after fiscal policy decisions affecting federal borrowing have begun to take effect. In the absence of sufficient revenue, a failure to raise the debt ceiling would result in the administration being unable to fund all the spending which it is required to do by prior acts of Congress. At that point, the government must cancel or delay some spending, a situation sometimes referred as a partial government shut down.
I don't see anything about "paying off" but plenty about the restrictions on the Treasury to receive debt in order to pay off services.
Although the Obama administration did say this.
In addition, the Obama administration stated that, without this increase, the US would enter sovereign default (failure to pay the interest and/or principal of US treasury securities on time) thereby creating an international crisis in the financial markets. Alternatively, default could be averted if the government were to promptly reduce its other spending by about half.
Also a lot of this government spending doesn't go back into the economy, at least not efficiently.
In 2009, the private sector was estimated to constitute 86.4% of the economy, with federal government activity accounting for 4.3% and state and local government activity (including federal transfers) the remaining 9.3%.While its economy has reached a postindustrial level of development and its service sector constitutes 67.8% of GDP, the United States remains an industrial power. The leading business field by gross business receipts is wholesale and retail trade; by net income it is manufacturing.
So they spend 38.9% as a percentage of the total GDP and the public sector is that small? How is that good? It seems to me as if a lot of this money is wasted somewhere, and hence the more efficient private sector would put it to much better use.
edit: Government spending in the United States of America occurs at several levels of government, including primarily federal, state, and local governments. The Organisation for Economic Co-operation and Development (OECD) reports that total federal, state and local spending in the United States was $6.134 trillion in 2010.[15]
