In America debts are nothing new and neither are debt ceilings
By Dian Vujovich
Monday, as in tomorrow, is a big day for debt. That’s the day our government debt will hit $14,294 trillion— the debt ceiling cap set by Congress in February of last year, 2010. How that situation will be handled is anyone’s guess today.
But until we know, here’s a little bit about debt ceilings and America.
America has always been into debt. Hey, the Pilgrim’s wouldn’t have gotten here without outside financial support. Since then, a lot of other people’s monies have played a big hand in the continued development and building of our nation as well as for the cost of the development of much of the goods, services and products we use.
As for debt ceilings, they’ve been around for 94 years, since 1917. That’s when Congress passed the Second Liberty Bond Act to help finance World War I. As a result of it, the Treasury issued long-term Liberty Bonds that were sold to the general public. And, a limit on the amount the government could borrow without requiring a vote from Congress was put into play.
But just as the times have changed so have the debt ceiling limits and the size of our nation’s debts.
According to a January 28, 2010 Congressional Research Report, there are two ways the federal government can increase debt. One, sell bonds, i.e., make loans that require timely interest payments and payment in full when the bonds mature. The other relates to the costs of financing various government accounts—think “Social Security” or “Medicare” or other govt. programs here. In the end, it’s the combination of the amount of bond debt plus the costs of programs in our government accounts that totals our federal debt. A debt you don’t want to be more than the debt ceiling.
A look back at various debt ceilings shows that they have been raised about 100 times since inception. And that their caps have changed hugely. In 1939, for instance, the debt limit was $45 billion, according to that same Congressional Research Report. After WWII ended, it had swelled to $275 billion. That, however, was $25 billion less than it had been in 1945.
The ceiling got into the trillions in the 1990s, by 2002 was over $6 trillion and now it’s more than doubled that figure.
So what’s the big worry about raising the ceiling when debt is nothing new for us nor is raising the ceiling? Well, while historical charts show the spread between the debt ceiling and the amount of federal debt owed isn’t typically that far apart from one another—the debt ceiling being the larger of the two—that worry today is that that’s going to change going forward.
Should that happen it would translate into money problems. Big money problems. Those not unlike the ones you could face if there weren’t enough money coming into your house each month to cover all of the bills and living expenses even after all savings and retirement accounts had been raided. Ugh!
I’m figuring the ceiling will be raised and hoping that our economy gets humming again. Plus, the so-called jobless recovery doesn’t happen and that good ole American ingenuity , the stuff behind what’s made our country great, moves full steam ahead bringing with it a huge rise in our GDP.
Oh what happy days that would bring. And it’s all even possible.
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