About 'cnn debt'|WORLD CRISIS : MOODY ‘S DOWNGRADES JAPAN ‘S DEBT RATING ! – CNN.com
According to the Department of the Treasury, the debt ceiling set by Congress was reached on Monday morning. At that time, the United States government, by law, could no longer legally borrow any more money for expenses that the government might incur. To be able to borrow money again, the debt ceiling would have to be raised. According to CNN Money, politicians on the left have been warning that not raising the debt ceiling could have catastrophic consequences on America's credit standing in the world, while Republicans, especially tea party Republicans, maintain that if the debt ceiling is left as is, the government cannot increase its debt and will then be forced to cut unnecessary spending and decrease the size of government. But ignorance of the debt ceiling itself might be driving the argument. The debt ceiling was established at $14.294 trillion, a mark that has been reached. Treasury Secretary Timothy Geithner and worried congressmen (mostly Democrats, but some Republicans) have been warning that to leave the debt ceiling at its present level and not allow the federal government to borrow to maintain its operations and programs would be irresponsible. In fact, the word "irresponsible" has been used to describe not raising the debt ceiling by Republicans as well, including Speaker of the House John Boehner. Why is that? Because if the government cannot borrow to pay for the programs it has in place and cannot pay on the loans that it already has out, then it will default on those loans. The government borrows money to make up the difference between spending and actual revenue, and with the tax cuts and tax breaks that have been in place for nearly a decade, revenue has been falling short of expenditures, sometimes by far. Even when budgets weren't as spend-heavy as they've been in the past few years, borrowing to pay for two wars and extensions on unemployment benefits (commonly known as "emergency" spending and not usually counted as budgetary spending, although it certainly counts when talking about accumulated debt) in addition to an overall decrease in tax revenues because of the lengthy recession and the housing meltdown have increased the national debt enormously. But is it time to panic? Republicans seem to think not. Generally speaking, many Republicans believe that nothing untoward would happen even if the Aug. 2 date is reached that Geithner insists would be the last day that he would be able to keep the government solvent. To get to that date, Geithner, who has also warned Congress that not raising the debt ceiling could send the fragile economy back into recession, has resorted to extraordinary measures like suspending investments in federal retirement funds and will also cut back on securities that go to state and local governments that help pay their bills. But once Aug. 2 is reached, the government will no longer be able to meet its obligations and drastic measures would then have to be met to allow the government's programs to continue to operate. In short, once the financial juggling cannot continue and the federal government is forced to face its creditors and obligations, it will be reduced to fiscal spending cuts and/or raising taxes to gain more revenue -- or raising the debt ceiling. Not raising the debt ceiling at this point will force the federal government to begin picking and choosing among its programs and its loans that it wishes to continue paying, setting up other loans for default. By extension, this would make the U.S. a financial liability among creditor nations and institutions, thus reducing the nation's ability to secure loans. Such a status has the potential to devalue the dollar, which is the fallback currency for just about every other national currency in the world, not to mention the base for the petrodollar and the price of gold in world markets. The U.S. dollar is the world's foremost reserve currency -- and that position could be jeopardized. If that should occur, the United States could lose its preferred economic status among the world's nations to other currencies, further injuring American financial viability. But there are 11 weeks for Geithner to juggle securities and suspending investments. At present, panic seems to be optional. But come August a decision must be made: Raise the debt ceiling or take the chance on defaulting on outstanding loans, cutting billions of necessary (and unnecessary) programs, risk regressing back into a recession, and devaluing the dollar. |
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