July 2, 2012

Remember The Debt Ceiling Debate? It’s Back

As Election Day nears and campaigning is in full swing, a hot topic that visited us last August will probably revisit us this election: the debt ceiling debate.  Specifically, the issue centers around whether the government should raise the amount of debt that it can borrow in order to make the “budget” work.

https://www.npr.org/2012/05/23/153503856/remember-the-debt-ceiling-debate-its-back 

Even though the government’s budget is calculated in the trillions of dollars, we can just use the government’s balance sheet to show why we have such a large amount of debt as a country.  If you have more debt than assets, and the only way to afford the debt is to incur more debt (i.e., raise the debt ceiling), you have a financial disaster.  The government is doing what many of us individuals do…if you run out of available credit on one card, you open another, and then another, and then another…but before you know it, you have amassed a large amount of debt you can no longer service.  Luckily for us, but unlucky for the country, individuals have debt settlement to help them negotiate a reduction in the debt owed to get debt free within a short period of time.  Because the government does not have this option, and as a country going BK is not really an option, certain members of the government are trying to raise the debt ceiling so that it can pretend the country can afford the debt it has by borrowing more.  Is this a good plan?  Something to consider as we decide who to elect as our next president.

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