Lesley Garrett
Late on July 31, time ticked by as President Obama and Congressional leaders from both parties faced a looming decision. They had to come to an agreement on whether to raise the national debt ceiling. Much like the detonation of a bomb by a single snip of a wire, Obama and company needed to carefully choose what must be cut in order to avoid an implosion in an already touchy economy. The final decision? A raise in the debt ceiling by up to $2.4 trillion in conjunction with cuts in two phases: 10 year spending cuts equating to at least $2.4 trillion and $900 billion spending cuts to be put into place immediately.
To understand the magnitude of this decision, a passing understanding of the debt ceiling is necessary. Basically, the debt ceiling is the government's spending limit. By law, Congress has to approve any action taken to borrow money. The increase in the amount of US debt has in turn caused the US Treasury to require more money to pay off their loans. So, the Treasury has once again requested Congress to allow more money to be borrowed, so they can pay for what they've already bought or at least the interest on the loans they’ve already taken out to pay for it.
Don't quite understand? Say for instance you go out to eat at an expensive restaurant on a date, because dinner comes first. You've both ordered and eaten, and are currently facing the check. You have to pay it, but you have nothing but your parent's credit card. Before you hand it over, you must first ask permission from your parents since it is their money. Most likely with great grumbling, they allow you to pay off the debt so you aren't stuck washing dishes the rest of your life. However, the condition is you have to cut back on your driving the next week because the meal replaced gas money.
Like your parents granting money to pay for your meal, Obama and the Congressional leaders decided to grant the Treasure money to pay for their daily bills. "It's an important first step to ensuring that as a nation we live within our means," Obama said at a Rose Garden news conference following the vote. "This is, however, just the first step. This compromise requires that both parties work together on a larger plan to cut the deficit." Currently, the debt ceiling has been raised by $400 billion. After September, it will increase by another $500 billion. The act is also capping domestic and defensive spending. Between $1.2 and $1.5 trillion worth of cuts are yet to be made, and will be decided on by the end of the year.
As to be expected, the decision caught much flak from all sides. Democrats argued that the plan cut spending too much without any room to raise revenues. Republicans disliked the idea of any increase in the debt limit. Economist suggested that cutting in the spending would contribute to a slow economic recovery.
The bipartisan debt-reduction committee of Congress has until Thanksgiving to agree on the second budget cuts proposal. If they do not meet the deadline, there will be immediate across-the-board cuts equating to $1.2 trillion. This would be distributed between defense and non-defense spending. Programs that help aid low-income Americans (Social Security, Medicaid, food stamps, etc.) would not be affected.
