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According to the Treasury Department, Congress had to pass a law allowing the U.S. to borrow more money to pay its bills by Aug. 2 or risk going back on promises the government made to its creditors (people and institutions that loaned it money).
Many Republicans said they wouldn’t vote to let the U.S. borrow more money - called ‘raising the debt ceiling’ - unless they got major spending cuts. Democrats wanted to use this chance to get rid of tax cuts the wealthiest Americans (those making over $250,000) have been getting for the last decade. However, the agreement reached by the president and Congressional leaders does not include any new taxes or undo the tax cuts.
The agreement does include spending cuts equal to the amount the debt ceiling will be raised and restrictions on how much money government agencies may spend.
It also creates a committee with members of both parties that will examine further options for bringing down the national debt, including possibly raising more money through changes to the tax code.
Compromise was hard to reach
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President Obama and Speaker Boehner met many times to try to come to an agreement to raise the debt ceiling. |
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For weeks, every attempt at compromise between President Obama and Speaker of the House John Boehner (R-Ohio), who leads the Republicans in the House of Representatives, ended in failure. Both President Obama and Speaker Boehner addressed the nation in a rare set of dueling speeches about what’s at stake and why each of their approaches is the correct one.
“The only reason this balanced approach isn't on its way to becoming law right now is because a significant number of Republicans in Congress are insisting on a cuts-only approach - an approach that doesn't ask the wealthiest Americans or biggest corporations to contribute anything at all,” said President Obama.
“The American people will not accept an increase in the debt limit without significant spending cuts and reforms,” Boehner countered. “The solution to this crisis is not complicated: if you're spending more money than you're taking in, you need to spend less of it.”
However, as the Aug. 2 Treasury deadline neared, leaders felt pressure from the American people to reach a compromise before the country suffered predicted harsh economic consequences.
A nation in debt
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Currently, the U.S. government is about 14 trillion dollars in debt. |
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America’s national debt currently stands at about $14 trillion dollars - a sum of money most people can’t even imagine. That number was calculated by adding up all the deficits - or the government expenses not paid for by taxes and other incoming money - after each budget cycle.
Much like many individuals and families, the U.S. government makes a budget every year, deciding what it will spend its money on. Some of the most expensive programs on the government’s budget every year include healthcare benefit programs like Medicare and Medicare, the retirement savings plan Social Security, and national defense. Other important items on the national budget include education for all public school children, payroll for government workers and national parks and museums, among many others.
Sometimes, Congress and the President are able to decide on a ‘balanced’ budget, where the money the U.S. brings in equals the amount of money it spends. Once in a while, the government even brings in more money than it spends, known as a ‘surplus.’ Other times, as has been happening more recently, the government spends more money than it brings in - known as a ‘deficit.’
Generally, the government brings in most of its money through the taxes that all Americans pay.
What was at stake?
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If Congress hadn'tt pass a bill to raise the debt ceiling by Aug. 2, the U.S. dollar could have quickly dropped in value. |
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Raising the debt ceiling has become a relatively routine practice in the last few decades - President Obama noted in his speech to the nation that “President Reagan did it 18 times (and) George W. Bush did it 7 times.”
However, many current lawmakers were elected because they promised to slash the national debt. They insisted they wouldn’t vote for a debt ceiling increase this time, making it harder for leaders to gather the votes they needed to pass the bill.
Economists warned that if the debt ceiling was not increased by August 2, companies and individuals who had invested in the U.S. government would think their money wasn’t safe anymore and would pull their investments out, causing economic upheaval. And, for the first time in history, the U.S. was close to receiving a downgrade in its credit rating, which would be like a straight-A student getting his first B or C.
"It was a long and contentious debate, and I want to thank the American people for keeping up the pressure on their elected officials to put politics aside and work together for the good of the country," President Obama said after he had signed the bill raising the debt ceiling.
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Joplin was able to rise from the ashes because of help from everyone. And I am eternally grateful to anyone who made that possible.
