The current debate rocking Washington D.C. is one that many people consider to be merely a technical annoyance, but to others such as myself, it is of crucial importance for our future. The debt ceiling.
What is the debt ceiling, and why is there such partisan division over this issue in Washington? Like any family or business, the government has expenses such as the military, roads, welfare and many, many others. The government needs some way to pay the bills, and like any organization they have two options: income or debt.
Income comes from taxation or printing more money. The second option is to borrow money and increase the debt.
The debt ceiling was established in 1939 as a way of limiting the amount of debt that the federal government could take on. It is extended either by a certain dollar amount, or for a certain length of time. Every time this limit is reached, congress has to raise the debt ceiling again in order to continue to borrow.
There was a long battle on Capitol Hill the first week in October, with the lines drawn directly down partisan lanes. Finally a compromise was reached when 11 Republican Senators (including minority leader Mitch McConnell) voted to advance the bill past the filibuster and on to a final vote.
On Oct. 7, Congress voted to extend the debt ceiling through early December, meaning that the federal government can continue to borrow until then.
While the raising of the debt ceiling was ostensibly under debate, there was virtually no chance that it would not get raised. Both parties want to avoid a government shutdown, and they are merely using this as a bargaining chip when discussing the budget. Most politicians are consistently in favor of raising the national debt if it accomplishes their goals, even Republicans who occasionally give lip service to reducing the deficit.
Most mainstream Keynesian and Classical economists do not contradict and even support this policy, but some economists (Austrian School and some Classical School) and political philosophers from the classical liberal and libertarian tradition believe that increasing the national debt will inevitably lead to a major depression down the line.
Like any family which has taken on debt, the government must eventually pay it off. This can only come in the form of extremely high taxes or ordering the Federal Reserve to print more money, both of which will have serious economic consequences.
The issue of the debt ceiling has been pushed back to early December, but the debate will continue to be an issue of contention for all political viewpoints.
