The Debt Ceiling and Government Shutdown The debt ceiling controls the amount of money the US government can borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds and other payments. The debt limit does not authorise new spending commitments. It is usually set by the Congress. Thus the US government has to borrow; however, being at the debt ceiling it can’t borrow. The current US national debt as of 2/3/2014 at 2:56:10 pm GMT is $ 17,434,039,917,453.87Thus with the debt ceiling, government spending would be cut to the point of spending equals tax revenue.
Such a big decline in government spending could mean recession and would have catastrophic economic consequences. It would cause the government to default on its legal obligations, which would precipitate another financial crisis and threaten the jobs and savings of everyday Americans. Thus the most secure debt on the world would be seen as risky, causing an increase in interest rates for US government borrowing. My biggest surprise was the fact that all government obligations could come to a halt if the Congress failed to increase the government’s borrowing limit.
It really caused a lot of anxiety and almost put the US right back in a deep economic hole, just as the country was recovering from the recent recession. Thus increased government borrowing means more spending which translates to more jobs, expanded economy, lower interest rates and thus a better GDP for US. As on December 12th 2013, debt held by the public was approximately $12.312 trillion or about 73% of Q3 2013 GDP. Intragovernmental holdings stood at $4.9 trillion (29%), giving a combined total public debt of $17.226 trillion or over 100%GDP. Work Citedhttp: //www. cnbc. com/id/101117410http: //www. usdebtclock. org/http: //www. treasury. gov/initiatives/pages/debtlimit. aspx