The debt ceiling is a term that has been thrown around in political discussions for a long time, but what does it really mean? In simple terms, the debt ceiling is the limit on the amount of debt that the United States government is allowed to have outstanding. This limit is set by Congress and can be raised or lowered by lawmakers.
In recent years, the debt ceiling has become a contentious issue, with some politicians arguing that the limit should be lowered and others arguing that it should be raised. In this blog post, we will explore what the debt ceiling is, why it exists, and why we need not worry about it.
What is the Debt Ceiling?
Again, the debt ceiling is a limit on the amount of money that the United States government is allowed to borrow. This limit is set by Congress and can be adjusted by lawmakers. The debt ceiling was first introduced in 1917, and it has been raised more than 100 times since then. The current ceiling is set at $28.5 trillion.
Why Does the Debt Ceiling Exist?
The debt ceiling exists to limit the amount of money that the United States government can borrow. The idea behind the debt ceiling is that it forces lawmakers to consider the long-term impact of their spending decisions. If the government hits the debt ceiling, it cannot borrow any more money, which means it cannot spend more than it takes in. This is intended to prevent the government from running up large deficits and racking up an unsustainable amount of debt.
Why We Need Not Worry About the Debt Ceiling
Despite the political rhetoric around the debt ceiling, there is no need to worry about it. This is because the debt ceiling is largely a symbolic limit. When the government hits the debt ceiling, it does not mean that it cannot pay its bills. Instead, the government has to use a series of accounting tricks to make sure that it can continue to do so. These tricks are known as “extraordinary measures,” and they include things like delaying payments to certain government programs and borrowing from other government accounts.
In the past, the government has hit the debt ceiling several times, and each time it has used these extraordinary measures to avoid defaulting on its debt. This means that even if the government hits the debt ceiling again in the future, there really is no need to worry about a default.
Furthermore, the debt ceiling is largely a self-imposed limit. If lawmakers wanted to, they could simply raise the debt ceiling or do away with it altogether. This would eliminate the need for the government to use extraordinary measures when it hits the debt ceiling.
Conclusion
The debt ceiling is a limit on the amount of money that the United States government is allowed to borrow. Despite the political rhetoric around the debt ceiling, we feel there is no need to worry about it. When the government hits the ceiling, it does not mean that it cannot pay its bills. Instead, the government has to use a series of accounting tricks to make sure that it can continue to make good on its obligations. Let us not forget: the debt ceiling is largely a self-imposed limit, and lawmakers could simply raise the debt ceiling or do away with it altogether.
In any event, this won’t be the last time we talk about the debt ceiling so long as limits are in place; yet, the world will keep spinning on its axis, and some other headline will take our focus away from this issue. Anyone remember Russia and Ukraine?
In other words, now is not the time to panic and make rash moves with your investments or financials. If you want to talk it through, our team is here for you. Schedule a complimentary strategy call here.
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