Now bear with me, as I know this is an extremely simplified view of the issue. But here’s the gist of all this conversation about increasing the debt ceiling, and how the US should go about dealing with it’s ballooning deficit:
You own a credit card. Your credit card limit is $750. You are currently at $700 of that $750 limit and you’re looking to buy groceries for the month. Groceries that, for just the basics, will cost you and your family of four (at least) $100.
That puts you $50 in the red. You are in debt.
Ideally, you’d be able to walk into your bank and say that, based on your history of paying your credit card on time, they should go ahead and raise your credit limit. Simple. Happens all the time.
Meanwhile, back on the home front, if you and your husband or wife are serious about dealing with your debt, a conversation should be had about how to make sure that, even though your “debt ceiling” is being raised, you’re doing what you can to make sure that you are still making payments on the debt that you owe. This will require two things: Spending cuts (you don’t need the $4 latte at Starbucks, the $1.50 coffee will do just fine), and making more money (you might need to get a second job).
If you cut spending, you eliminate some of your wants and bring your “deficit” down.
If you make more money, you increase the amount of money you’re able to spend on your needs and bring your “revenues” up.
As a family with kids to put through college, and groceries and bills to pay for month-to-month, there would be no reason for you to be decidedly against either spending cuts or revenue gains. Even though it means working harder, both make complete sense and are necessary to make sure you can make your payments.
This is, essentially, the conversation that’s going on in Washington. Only you should take that family of four and multiply it by (more or less) 77 million people (the US population was estimated at 311,819,000 as of July 24th, 2011).
Should we stop spending money on unnecessary things (do we need a government-sponsored website for people that play the banjo)?
Should we also increase the amount of money we make (i.e. raising taxes, closing loopholes)?
Do we only do one of those two options?
Or do we do both?
Neither of these options are directly tied to whether the debt ceiling should be raised: The fact of the matter is that—in the same way that you would want to have your credit limit raised so you can buy your groceries and not default on your credit card—we need to raise the debt limit, or the US loses it’s AAA credit rating. But these are the questions that are tied to whether or not our lawmakers will raise the debt ceiling in time.
It’s an honest debate. And one that needs to be had. America’s rising debt is a huge issue.
However, I’m not convinced that our deficit will be properly dealt with if we solely cut spending without closing tax loopholes. The same way that it wouldn’t be properly dealt with if we closed loopholes and didn’t cut spending. We either tax and spend, or borrow and spend. Either way we spend. And borrowing simply increases our debt. It’s a lose-lose. Everybody “loses” and sacrifices a bit more in the short-term, so that we don’t capital-L Lose in the long-term.
Lastly, for anyone that thinks that raising the ceiling is a new thing, it’s not. According to CNN, “Since March 1962, the debt ceiling has been raised 74 times, according to the Congressional Research Service. Ten of those times have occurred since 2001.” It was raised 17 times under Reagan, four times under Clinton, seven times under George W, and three times (already) under Obama.
This is not new. This is routine. And, again, like I said previously, I know that this is an extremely simplified way of explaining this uber-complex issue. Undoubtedly if you would like to go out and complicate the issue to the point where you can’t understand it, you can. But it’s worth trying to bring the scale of the issue down into terms that we can all wrap our heads around.