Federal Debt Ceiling
The debt ceiling or limit is the amount that the government is permitted to borrow (Parkin 54). In the United States of America, the national law requires the Congress to approve the government to get loans on any money needed to pay for the programs that the Congress has approved. Due to the growth of the national debt, the Treasury has sporadically faced this debt ceiling. Approval to increase the debt ceiling is among the slightest popular things done by the Congress, although the limit has been increased several times usually with a little ordeal. In 2011, the debt limit turned out to be the fundamental battleground for disagreement between the Republicans who were in power of the House in the elections of 2010, and President Obama and the Democrats who are in control of the Senate currently (Eells 1).
The Department of Treasury proclaimed in May that the debt ceiling of $14.29 trillion had been attained. It was also stated it could uphold the normal functioning of the government by extraordinary dealings that would operate their course by August 2. Vice President Joseph R. Biden Jr. led the bipartisan talks and said that the improvement had been made towards sketching $1 trillion to $2 trillion in potential savings in late May (Eells 1). The negotiations disintegrated as the Republicans rejected the Democratic persistence that an agreement included increases of revenue and spending cuts in June. President Obama recommended an across-the-board $4trillion deficit-decrease agreement that would consist of decreases in Medicare and Medicaid, Social Security reduction, and also alterations to stop tax loopholes in July. The House Republican head, Speaker John A. Boehner, showed interest, but rapidly refused from his intentions in the face of complaints from conformists that opposed to tax raises.
On July 31, President Obama and Congressional heads of the Republican and Democrat parties proclaimed a negotiation that would increase the debt limit by $2.4 trillion in two ways sufficient to continue borrowing till 2013. The deal called for at least $2.4 trillion in spending cuts for more than ten years with $900 billion in sweeping cuts to be endorsed immediately (Eells 1). In accordance with the Pact Act proclaimed on July 31, the Congress raised the debt ceiling to $15.2 trillion at that time; the ceiling increased to $16.4 trillion subsequent to Senate Democrats voting down a motion of censure that had been approved by House Republicans in January 2012.
Total debt of the central government can rise in two ways. Firstly, debt rises when debt is sold to the public by the government to finance budget arrears and obtain the financial resources required to fulfill its duties (McConnell, Stanley, and Sean 102). This raises debt that the public holds. Secondly, debt rises when the central government disburses debt to specific government accounts, like the Social Security, Transportation trust funds, and Medicare in substitute for their recorded surpluses. Because of this, there is an increase of debt that the government accounts holds. The debt ceiling can deter the ability of the Treasury to manage the central government’s finances (McConnell et al 110). In severe situations, when the central debt is very close to the legal limit, the Treasury is forced to take unusual and unexpected measures so that federal obligations can be met. Although federal government has not default on its duties due to the debt limit, sometimes it has created great inconveniences and has added doubt to the running of the Treasury (Parkin 54).