Research Paper- The Debt Ceiling

Research Paper- The Debt Ceiling - Research Paper- The Debt...

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Research Paper- The Debt Ceiling Research Paper- The Debt Ceiling Sang Won Hwang 11/08/2011 1
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Research Paper- The Debt Ceiling The Debt Ceiling The debt ceiling issue is the true financial crisis of 2011. The debt ceiling is the limit that the government can owe to other sources such as individuals or countries. The limit was set at the staggering, and steadily increasing, $14.294 trillion dollars, as in $14,294,000,000,000. The nation is spending much more than it is earning, and therefore the treasury does not have the financial backing to pay for federal spending, so naturally it issues debt to pay for the deficit. It is not that America was in the green before 2011, but it was due to the recession of 2008 that government spending had increased dramatically (Uctum, 2000). The government spending increased on bailouts, an unemployment increase, and tax cuts. In order to change the debt ceiling, Congress must pass legislation, which is then signed by the President to create a law. By May 2011, over 39% of our nation’s budget relied on additional debt in some fashion (Cha, 2011). By raising the debt ceiling, America is allowed to continue increasing the debt level, but if denied an increase government spending would have to be cut by over 40%, changing our entire budget system and its products. The Treasury made the decision easy by claiming that if the debt limit was not raised, the nation would default and it would drastically effect the economic in a devastating fashion (Cooper, 2011). Government spending on social security, military salaries, medical benefits, and interest rates would be either drastically cut or eliminating completely to meet the limit. Treasury made it quite clear that it is extremely important that the nation not default, so naturally the limit must be raised (Nolan, 2011). But was not raising the debt ceiling even an option to begin with? Experts were certain that not raising the debt would lead to negative effects, but on varying degrees of 2
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Research Paper- The Debt Ceiling economic distress. Some argued that it would be completely devastating and the nation would fold under its own cost of debt and defaults. Others argued that its possible to simple write the cost off defaulting off as a Congressional dispute and it would have few, if any, lasting effects. Timothy Geithner, a Treasury Secretary, warned Congress that if a default was to occur millions of American jobs would be lost, government spending would plummet from necessity, and every working American would have to pay for it in the form of taxes for what could be decades to come (Cooper, 2011). Geithner further argued that it is possible though, that the debt could be reprioritized by cutting 40% of government debt payments by simply choosing which to default on strategically. The
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Research Paper- The Debt Ceiling - Research Paper- The Debt...

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