On January 13th in a letter to congressional leaders, Treasury Security Janet Yellen warned the United States is projected to hit its $31.4 trillion debt borrowing limit by January 19th. She went on to say that if action is not taken to raise the borrowing limit, the Treasury would be forced to take “extraordinary measures” to avoid default on its obligations.
What is the debt limit?
The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that Congresses and presidents of both parties have made in the past.
When was the last time the U.S. had a balanced budget?
The last U.S. balanced budget was in 2001. Bill Clinton was President and the Republicans controlled Congress.
What is a “Balanced Budget?”
A budget is considered balanced with there is no deficit or surplus. The spending and revenue are equal, thus a balanced budget.
What happens with debt interest costs?
Interest on the debt must be paid every year. Increasing debt increases the interest owed. As debt rises, debt holders demand higher interest to compensate for the higher risk. The increasing cost of interest rates can cause a recession.
Has the U.S. ever experienced a fiscal year-end surplus?
The U.S. has experienced a fiscal year-end budget surplus five times in the last 30 years, most recently ins 2001. When there is no deficit or surplus due to spending and revenue being equal, the budget is considered balanced.
When was the last time any of the principal of the national debt was paid?
The last time the U.S. was able to completely pay off the national debt was in 1835. From 1998 to 2001, the national debt was reduced each year.
Why does the Budget deficit matter?
The concern is that the country will not be able to pay its debt off. Most of the national debt is held by those who have purchased Treasury notes and other securities. Deficits add to the national debt, increasing the amount owed to security holders which in turn increases the interest owed and the interest rate.
How can the government reduce the deficit?
There are two levers that are used to reduce the deficit. The government can reduce the deficit by increasing revenues, decreasing spending, or both.
What are the methods the U.S. government uses to increase revenues?
There are direct methods such as increasing tax rates, reducing tax breaks, expanding the tax base, improving enforcement of tax laws, and levying new taxes. They can indirectly increase revenues through policies that increase economic activity, income, and wealth.
How can spending be decreased?
- First, politicians can stop spending billions of dollars on things that have already been identified as waste, fraud, and duplicate services. Look no further than “earmarks” included in bills as a starting point.
- Second, focus funding on constitutionally mandated duties of the federal government. National defense should be a priority. Many programs funded by the federal government should be returned to the private sector and state and local governments. These programs often work best and cost less when they are run by those closest to the people affected by them.
- Third, begin the process of reforming (not eliminating) the biggest social programs in the U.S. budget. Among these are Social Security and Health Care. We need to get past the politics of these social programs and work toward agreement on what can be done to improve the lives of this nation's citizens.
What are earmarks and for that matter, what is “pork spending”?
Earmarks provide a way for members of Congress to select specific projects to fund. These “community projects” give members of Congress a straightforward and “small-scale way” to support their districts. Earmarks make it easier to pass bad legislation by letting incumbent politicians “bring home the bacon” at national taxpayer expense. Earmarks are not typically listed in a bill, but rather hidden within “explanatory statements.”
A deeper look at Federal Spending in graphic form provides deeper insights here.
So here we are - $31 plus trillion in debt. The most crucial impact of the national debt is debt bondage. Every citizen of the United States is under a debt obligation of $93,000 per person currently, and growing.
History shows us that our federal government and the politicians we have elected are lacking in skills and desire to manage a budget. We entrusted them to make good decisions, and to be fiscally responsible to us, the people who pay their salaries and the taxes to fund our federal government. They have broken our trust.
A storm is brewing and it is a grassroots movement – The Convention of the States. This is what the Convention of States movement was created to prevent. No federal overreach. No blanket decision-making in D.C. that affects all Americans, with zero say from the people and no bipartisan oversight.
Washington is broken. Here at Convention of States, we have a solution as big as the problem. An Article V Convention of States is called and controlled by the states and has the power to PROPOSE constitutional amendments. These are our three simple talking points.
1. Limit the power and jurisdiction of the federal government (including the president)
2. Limit the terms of office for federal officials
3. Limit the ability of Congress and the president to spend and waste our hard-earned money. What can you do? Sign the petition:
Let your legislators know you want them to take action. Sign the petition here.
