Myth:  Congress can raise the debt ceiling to allow more government borrowing with no consequences.

Fact:  The bigger the debt, the more the interest on it eats into the overall federal budget.

Overview:

The Debt Ceiling is the amount, set by Congress, that represents the total debt of the country. Once borrowing reaches the limit which has been set, the government cannot spend any more money. Pressure is then put on Congress to raise the Debt Ceiling, with ongoing threats of all the doom that will happen if the government has to “shut down.” And Congress always caves. And the debt ceiling keeps getting higher and higher.

More/Less

Keep in mind that borrowing is only necessary if the government runs a deficit (spends more than it takes in in tax revenue). Here’s a good way to understand the problem.

Lesson #1

*U.S. Tax Revenue: $2,170,000,000,000

*Federal Budget: $3,820,000,000,000

*New Debt: $1,650,000,000,000

*National Debt: $14,271,000,000,000

*Recent Budget Cuts: $38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

*Annual Family Income: $21,700

*Money the family spent: $38,200

*New debt on the credit card: $16,500

*Outstanding balance on the credit card: $142,710

*Total budget cuts so far: $38.50

GOT IT?  Ok, now,

Lesson #2 – Another Way to Look at the Debt Ceiling

Let’s say you come home from work and find that there’s been a sewer backup in your neighborhood, and your home has sewage all the way up to your ceilings. 

What do you think you should do – Raise the ceilings or remove the shit?