U.S Debt ceiling

Introduction

Progress of an economy is measured in terms of how well a country manages the flow of capital and cash. Difference in the collection and payment structure defines proportionate purchasing capability of government. Debt ceiling is imposed by the government to protect the structure of lending by government and manage its budget deficit. However, excessive cash outflow increase pressure on the government to move towards debt financing for cash acquisition to settle its payment.

Debt ceiling is a limit imposed since 1917 by US law to the federal government debt. However, US government gradually increased the limit with the passage of time. Congress has the sole power to borrow money for the government needs under section 8 of Article 1 (Ornstein, 1). Recent increase in the debt ceiling shifted the limit to 14.294 trillion dollar. President Barrack Obama allowed Congress to raise the debt ceiling to a minimum of $ 2.1 trillion (Baker, 1).

US Debt Ceiling

U.S. president, Barrack Obama, signed an agreement that allows the elevation of the limit of U.S. debt. This ended weeks of political battles in Washington and evaporated the ghost of a cessation of payments without unprecedented in the history of that country. Obama signed an agreement that fully supports one or very satisfied with any party, but it is essential to remove the threat of bankruptcy looming over the country from midnight if Congress had not given its approval (Broun, 1).

The Senate approved the bill by 74 votes in favor and 26 against the agreement that authorizes the increase in U.S. debt and avoiding what would have been an unprecedented default. Before the Senate to a Democratic majority, the House of Representatives, Republican majority had already approved the action by giving 269 votes in favor and 161 against the action (Baker, 1). Serious concerns were raised by the opponents against the long-term impact of increase in debt ceiling by the government (Rugy, 1).

U.S. authorities have admitted that there is a possibility that U.S. government can no longer pay the interest on their loans if they do not increase the debt ceiling. This is concern with the required changes in debt structure of the economy. They emphasized on the fact that if the government is not allowed to borrow more, it would confront challenges in managing the funds need. In 2010, mandatory spending grew nearly 15 percent over the preceding year and amounted to $ 2.17 billion. National debt interest expense, also required - will cost U.S. taxpayers $ 164 billion this year (Broun, 1). Discretionary spending also increased significantly in 2010, increasing almost 14 percent from a year earlier to $ 1.38 trillion (Broun, 1). The United States has been unable to curb their spending, or find a way to offset its deficit with the additional revenues. The political agenda makes a tax increase proposal a tough sell, especially close to a presidential election year. U.S. could not have borrowed more unless the Congress (U.S.) authorized an increase in the debt ceiling (Broun, ...