News / USA

Understanding the Scope of the US Debt Ceiling

Understanding the Scope of US Debt Ceilingi
|| 0:00:00
...    
🔇
X
Mil Arcega
December 05, 2012 11:56 PM
No discussion on the fiscal cliff would be complete without first taking a look at the U.S. debt. But for many - talk of U.S. debt and the debt ceiling is often abstract because it lacks scale. For some perspective - we asked Mil Arcega to give us a primer on the debt ceiling and how it relates to the so called fiscal cliff.
Understanding the Scope of US Debt Ceiling
No discussion on the fiscal cliff would be complete without first taking a look at the U.S. debt. But for many - talk of U.S. debt and the debt ceiling is often abstract because it lacks scale.

It's not some architectural feature unique to Washington. The debt ceiling is a borrowing limit - passed by Congress in 1917 to fund the war effort. Back then, the ceiling was slightly more than $11 billion.
 
Economist Richard Rahn, a senior fellow at the CATO Institute, said the idea was to enforce discipline on government spending.
 
"It's really redundant when you have a budget, but ironically it has turned out to be somewhat useful because it forces the debate occasionally about how much we're spending and how we're spending," he said.

U.S. fiscal cliff repercussionsU.S. fiscal cliff repercussions
x
U.S. fiscal cliff repercussions
U.S. fiscal cliff repercussions
Until recently, Congress routinely approved higher limits. But that changed in 2011 when a Republican-led Congress stalled on extending the ceiling, resulting in the first ratings downgrade of U.S. debt.
 
Today the ceiling is $16.4 trillion - a limit the U.S. is likely to exceed by February.
 
"I think it's beyond the human mind to be able to grasp numbers that big," said Rahn.
 
Just how big is the U.S. debt? It's easier to visualize if we start with a hundred dollars. A hundred of these makes ten thousand.
 
If we multiply that ten thousand by one hundred - now you have a million dollars. Enough to fit in a shopping bag. A hundred million - looks more impressive - shown here on top of a shipping pallet. Make that 10 pallets - and you have a billion.
 
But now it gets interesting.

Multiply these 10 pallets - one thousand times and you have a trillion - one, followed by 12 zeroes. Enough money to cover an entire soccer field - two pallets high.
 
So to imagine the size of the U.S. debt - multiply that double-stacked football field 16 times.
 
"We owe money to everybody. Of course foreigners have about 40 percent of our federal debt, not Americans. The biggest single holder are the Chinese," said Rahn.
 
Japan also owns a sizeable amount, as does Europe, along with private investors around the world.
 
Many conservative politicians want to cut the debt sharply, and some say the debt limit should not be raised without more spending cuts.
 
The Congressional Budget Office said the so-called fiscal cliff - automatic tax increases on January 1, along with spending cuts mandated by Congress to force negotiations on the debt ceiling - would cut next year's deficit in half.

But doing so all at once poses serious risks, said fiscal responsibility advocate, Robert Bixby.

"They’ve been pretty clear, the non-partisan Congressional Budget Office, that if we go over the fiscal cliff, their projection is that it would cause a recession and I’ve seen private sector forecasts that are even more adamant," said Bixby.
 
Some in Congress would like to see a higher debt ceiling as part of negotiations. For now, many economists say avoiding the shock that could come from higher taxes and government cutbacks is far more critical to the world's largest economy. Experts say any missteps could have big ramifications domestically and abroad, just when the global recovery appears to be losing momentum.

You May Like

India PM Modi's Party Distances Itself From Religious Conversions

BJP under fire for being slow to rein in hardline affiliate groups allegedly trying to promote Hindu-dominant agenda by luring Muslims and Christians to convert More

Anti-Whaling Group Found in Contempt of Court

Radical environmentalists who threw acid and smoke bombs at Japanese whalers in the waters off Antarctica continue their campaign to disrupt Japan's annual whale hunt More

UN's Ban Urges End to Discrimination Against Ebola Workers

Ban was speaking in Guinea on the second day of a whistle-stop tour aimed at thanking healthcare workers of the countries at the heart of the epidemic More

This forum has been closed.
Comment Sorting
Comments
     
by: Redcliff from: Aus
December 05, 2012 11:04 PM
This is an indictment of poor economic policy by successive governments and uncontrolled spending beyond its mean.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Decision on Cuba Underscores Divisions Among Miami Cubansi
X
Sharon Behn
December 19, 2014 9:34 PM
For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video US Decision on Cuba Underscores Divisions Among Miami Cubans

For decades, older, more conservative Cubans have been gathering at Café Versailles on the corner of Calle Ocho to eat Cuban food and talk politics. After hearing of President Barack Obama’s decision, a number of them gathered in front of the café with posters to protest. VOA's Sharon Behn reports on the situation.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Cuba Deal is Major Victory for Pope’s Diplomatic Initiatives

Pope Francis played a key role in brokering the US-Cuba deal that was made public earlier this week. It is the most stunning success so far in a series of peacemaking efforts by the pontiff. VOA religion reporter Jerome Socolovsky has more.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.

All About America

AppleAndroid