By Elli Ramlow
The debt ceiling is one of the many economic reasons the government shut down a few weeks ago. While the government is now reopened and the debt ceiling has been raised it is still a pertinent and significant issue. The government’s debt ceiling is the amount the government is allowed to be in debt—the total amount of money they owe other countries. Because the government is very close to reaching the ceiling price, a solution must be derived. As of now the solution has been to raise the debt ceiling, allowing the government to continue spending money they don’t have, however this is a short run solution and does virtually no benefit in the long run economy. A common misconception is that if the price ceiling is not raised, our government will be forced to declare bankruptcy. However, “the U.S. Constitution forbids defaulting on the debt” (2) per the 14th amendment section 4. This means that once the government reaches the debt ceiling price they will have to budget their money, or find funds elsewhere to continue spending at the rate they are. However we now that the solution has already been decided and that it is to raise the price ceiling.
While both sides are at blame for this issue, the Republican Party has been the recipient of the majority of blame by the American people as “an NBC/Wall Street Journal poll found a 22-point difference between those inclined to blame Republicans in Congress for their handling of budget negotiations and those blaming the president” (2). The blame, however, should be placed on the entire government system and their coherent inability to properly budget. Each year the government spends ridiculous amounts of money frivolously, that they simply do not have. The fact that they are raising a debt ceiling that is already in the trillions of dollars is preposterous. Furthermore, they are blind to the fact that this will not solve the problem in the long run. It is a short run economics solution that is not sustainable. It is not reasonable to continuously raise a ceiling because that obliterates the purpose of the original ceiling and its function. Instead of spiraling further into debt the government should look to “reform entitlements because that is where about three-quarters of the spending goes; principally to social security, Medicare, and Medicaid” (1). This would be a long run solution because it increases the income of the government indirectly by reducing spending therefore allotting more funds to be spent elsewhere. It is a sustainable and realistic long run solution unlike raising the price ceiling.
To put things into perspective let us take a look at the amount of money the government is currently spending; “before the debt ceiling was raised this month, it stood at $16.69 trillion” (3). A country that is over $16 trillion in debt should be looking to alleviate this debt through budgeting, not increase it. Another key issue is the fact that “the current US debt to GDP ratio is roughly 106.8 percent, meaning that the amount the federal government owes to its creditors exceeds its GDP” (3). This is extremely concerning because it means that although we have a thriving economy, our debt still outweighs it.
In turn, our debt hurts the global economy because the money we owe is mostly owed to other countries. Therefore allowing our debt to grow has negative consequences on not only the American economy but also the global economy. Therefore it is the government’s duty to lessen their current debt instead of raising the debt ceiling because of its overall effect. While raising the ceiling is an effective solution in the short run it proves to become a negative consequence to the long run. The government must reevaluate their spending and create a realistic budget that can provide relief from this immense debt.
The Debt Limit Explained: http://youtu.be/KIbkoop4AYE
Dorfman, Jeffrey. "Don't Believe The Debt Ceiling Hype: The Federal Government Can Survive Without An Increase." Forbes. Forbes Magazine, 3 Oct. 2013. Web. 28 Oct. 2013. <http://www.forbes.com/sites/jeffreydorfman/2013/10/03/dont-believe-the-debt-ceiling-hype-the-federal-government-can-survive-without-an-increase/>.
"Last-minutemen." The Economist. N.p., n.d. Web. 28 Oct. 2013. <http://www.economist.com/news/united-states/21588089-congresss-just-time-agreement-ignores-countrys-long-term-problems-last-minutemen>. Copied to Clipboard!
Milrom, Sophie. "15 Things to Know About the U.S. Debt Ceiling and Sovereign Defaults." The Huffington Post. TheHuffingtonPost.com, 28 Oct. 2013. Web. 28 Oct. 2013. <http://www.huffingtonpost.com/sophie-milrom/15-things-to-know-about-the-debt-ceiling_b_4145217.html>.