Debt Ceiling Drama!July 30, 2011
The debate surrounding the effort to raise the debt ceiling is political drama for sure, but if you ask any economist they’ll tell you its very serious business. The debt ceiling is artificial. It was created in 1917 by Congress after World War 1 to pay battle bills. Up to that point Congress just borrowed and spent, but in 1917 they passed the Liberty Bond Act which made it necessary for the Treasury to ask Congress to raise the debt ceiling so it could make more money available to spend.
Since then the debt ceiling has been raised 102 times. Ten times over the last ten years. In its first year the debt ceiling was at 11.2 billion dollars. Now, the debt ceiling (the most we can legally borrow) is 14.3 trillion bucks!
While interviewing people in West LA I found some who knew a lot about the “debt ceiling” and some who didn’t know what those two words meant despite all the news coverage. And, there were a few who worried about the impact to the economy if Congress doesn’t resolve this by August 2nd. That’s the date we’re told the U.S. will default. But, one 95 year old woman wasn’t worried. She wasn’t going to let herself get concerned that she might not get her social security check or not have Medicare coverage. The debt ceiling was created one year after she was born. She says the American people won’t stand for a default. And, with that she said .. the politicians will figure it out.