Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Wednesday, June 29, 2011

What's Happening With the Debt Ceiling Explained

The Basics: On August 2, the US government will reach the legal limit on how much money it can borrow—a.k.a., the "debt ceiling." It's currently set at $14.3 trillion. The government borrows money to pay for everything from tax refunds to wars and veterans' benefits, not to mention repaying our creditors, which include China, Japan, the United Kingdom, state and local governments, pension funds, and investors in America and around the world.

A debt ceiling has existed since 1917. Before that, Congress had to provide its stamp of approval each time the Treasury Department wanted to sell US debt to raise money. (Here's a wonky history of the debt ceiling [PDF], courtesy of the Congressional Research Service.) Putting a borrowing limit in place gave the federal government more flexibility to fill its coffers without going to Congress over and over. Lawmakers in Congress have raised the debt ceiling on many occasions, including eight times in the past decade, and Treasury Secretary Tim Geithner has said that failing to raise it and allowing the US default "would shake the basic foundation of the entire global financial system."

What Happens If Congress Doesn't Raise the Debt Limit? In a word: Catastrophe.

At least that's what Geithner told Congress in January. In an ominous letter, he wrote that a US default would wreak havoc on the domestic economy and essentially result in a hefty tax on all Americans.
That's economics 101. If you default on, say, your mortgage or car payment, creditors consider you a bigger risk and as a result, it'll cost more for you to take out loans in the future. The same idea applies here, too, except that everyone—consumers, cities, states, corporations, and the government—will pay higher borrowing costs if the federal government defaults, Geithner says. Not to mention that the government would run out of cash to pay the salaries of federal employees and members of the military, veterans benefits, Social Security and Medicare, unemployment benefits to states, individual and corporate tax refunds, Medicaid payments, and on and on.

Full Article
Source: Mother Jones 

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