What is debt ceiling? Why US hitting debt ceiling again and again ?

What is a ceiling? Well, the answer to that is fairly simple. Webster's Dictionary defines it as the overhead inside lining of a room, so that's what a ceiling is? But, a debt ceiling is different. The debt ceiling is a very different thing, though. It's kind of like an overhead lining, but it's one that protects the entire U.S. economy from total collapse. This is a very important ceiling.

Just like partygoers often raise the roof, occasionally the nation's most lively party goers Congress have to raise the metaphorical roof on the country too. Every so often, the debt ceiling must be raised, or the US risks defaulting on all of its debt. But what does all of this mean? Will I ever stop making bad jokes? The answer to the latter is never, and the prior will take a little bit more explaining. Explain simply the debt ceiling is a legislative limit on the amount of national debt that can be incurred by the US Treasury. It limits the amount of money the federal government may pay on the debt they already borrowed. Raising the debt ceiling doesn't actually mean committing to new spending. It's mostly needed to keep up on all of the interest payments for the debt that we already hold. Basically, raising the debt ceiling ensures we can keep making payments on the bills we already owe on money already spent. When the US government ends more money than it takes in through taxes. It has to take out debt to pay for that additional spending. The Act of Congress, OK, paying that debt is actually completely separate then raising the debt ceiling. Essentially, it's like Congress saying you can take out a loan when they vote for the budget, but needing to have a separate discussion to decide whether they're actually going to pay for that loan that they just took out, which is essentially what raising the debt ceiling does. But like, why should we even care about this?

So what if the US government doesn't raise the debt ceiling? That means less spending. Well, not really. If the debt ceilings aren't raised, 15 million seniors would stop receiving Social Security. Thirty million families would stop receiving child tax credit payments. U.S. military members would stop getting paid. Federal employees would stop getting paid as well. But an even bigger deal would be the US's credit rating. Our creditworthiness would be downgraded as a country, making us look bad. In the world as an investment, interest rates would subsequently spike, meaning you'd pay more for your car, home and credit cards. And we would also default, technically at least temporarily, on our existing debt, meaning who owns that debt wouldn't get their payment from us. Estimates on the impact of not raising the debt ceiling would likely result in the loss of 6 million jobs and a potential crash of the global economy. Neat.

So is this worse than a government shutdown? 1000 times yes, a government shutdown happens when Congress doesn't approve new spending, which stops paychecks and government spending. Raising the debt limit is simply for making sure we can keep paying all the people we already owe from previous spending. the US has never defaulted on its credit, and it would throw us into uncharted territory historically. Not only would paychecks stop, but every single payment from the US government would also stop bills from the country would stop getting paid. So why are we just now, when this content is being released, hitting the debt ceiling? Well, we're not. We've hit it about 80 times before, and Congress has voted each time to raise it. And technically, the US actually hit their debt ceiling, most recently on August 1st, 2021. Since Congress didn't raise it before then, the Treasury Department started doing whatever it could to pay our bills, like some sneaky accounting and moving around to funds. But that can only go on for so long. The Treasury Secretary told Congress they have until October 18th, 2021 to pass a ceiling increase. If they don't, the Treasury Department has no more tricks up their sleeve into the US is going to default. Depending upon when you're reading this, you'll know how the debt ceiling increase of 2021 played out. But scenarios like this are bound to happen again as government spending and US politics continue down a more polarized path of diffusivity.

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