Debt Ceiling Approaches!

If you've been paying attention to the news, in between all hoopla surrounding the Casey Anthony trial and hacking scandal in Britain, you may have heard a little something about a tiny problem called the "debt ceiling." And here's the thing...it's a much bigger deal than Casey Anthony or hacking Brits.

Long story short, the debt ceiling is the absolute legal limit that the U.S. government can borrow. You see, Americans like like getting stuff from the government. Stuff like Social Security checks, national forests, a sweet military with lots of stuff that go boom...you get the point. But we don't like paying a lot of taxes for that stuff. As a result, the government borrows money to cover the cost for the rest of that stuff...just like a credit card. We borrow money from other countries, like China, as well as from the Federal Reserve, mutual funds, and even individuals.

But there is a limit to how much we can borrow...that is the debt ceiling. We will reach that limit on August 2nd...that's two weeks away. Now, about seventy times before in our history, whenever we get close to the debt ceiling, the government just raises that ceiling. (Kinda if you could just raise how much money you borrow on your credit card). What's different this time is the political climate. The current debt for the U.S. is about $14 trillion...quite the chunk of change. Many people think that this kind of debt is unsustainable, and last year voted in many congressmen, mostly Republicans, who vowed to bring government spending under control. To make an even longer story short, Republicans in Congress have stated that they are willing to raise the debt ceiling...if Democrats are willing to start cutting spending. Democrats have said that cutting government spending will hurt the economy even more, and have instead proposed a reform of the tax code and tax hikes, particularly on the wealthy. Republicans have countered that tax hikes on the wealthy, people who invest in companies and start businesses, will hurt the economy even more than cutting spending...and the debate keeps going in circles.

What is for certain is that this is a big issue. How big? Nobody's really sure, because we've never had to face this problem before. If no deal is reached by August 2nd, there is the possibility of interest rates increasing, and there are rumors of social security checks not reaching the elderly...we'll have to wait and see, unless a compromise is reached.