CNN news 2011-08-01
First things first: What is the debt ceiling, and why do we have to keep on raising it? Our Chief Financial Correspondent Ali Velshi takes just over a minute to explain it.
The debt ceiling is exactly the same as your credit limit on your credit cards, except it's for everything that you borrow. It's like having one super loan. The United States is one of the few countries in the world that, by law, they have to keep on voting to increase the credit limit. Most countries just continue to borrow more.
So, the debt ceiling is the absolute top amount of money that the U.S. can owe to anyone at any given time. and it's about $14.3 trillion. So in order to raise that ceiling so the U.S. can borrow more money to keep things going, the debt ceiling has to be increased by Congress. This has happened many, many times before. It's usually fairly routine; this time it's not.
The U.S. actually hit the credit limit on May 16, but the treasury secretary has been able to keep the wolves at bay. He's been able to move piles of money around and basically keep us solvent until August 2nd. If we get to August 3rd and we've not raised the debt ceiling, somebody somewhere isn't getting paid.
And this is what we mean by that, by somebody not getting paid. These figures are for the month of August.
The government will bring in about $172 billion, mostly from taxes. But to fund all of its programs, it'll need more than $306 billion. For decades, the government has spent more money than it has taken in, which is why we have debt and why it's so high. But if the government doesn't raise the debt ceiling, it would not be able to spend more than it has.
That means some government programs wouldn't get all the money they need to operate. Now, these are the five goverment programs that require the most money. Medicare and Medicaid give medical care to the elderly and the poor. Social Security gives money to retired people. Add defense vendors, who make military equipment, interest on investments, and money for the Education Department, and your total comes to $180 billion.
That's just on the five costliest government programs, and it's already more money than the goverment would have! And if the government funded just these programs, people who work for the government wouldn't get paid. U.S. troops -- including those in Iraq and Afghanistan -- wouldn't get paid. Veterans wouldn't get benefits. Your parents might not get their tax refunds from the IRS. Federal highways might not get maintained. A whole bunch of stuff wouldn't get done.
Now, this is a simplified example. It's unlikely that the government would give just a few programs all the money they needed and let others go without anything. The Treasury Department would probably spread a thin amount of the money it had over a lot of different areas, giving some programs maybe just enough to operate. But it illustrates two things. One: How much more the government spends than it takes in. And two: Why many people in the government want that debt ceiling to be raised so badly, so the government can continue borrowing the money it needs to pay for all of its programs in full.
Things could change any minute. Congress is looking at a number of ways to raise the debt ceiling as we put this show together. So, check in with CNN.com every day to see if an agreement on how to do that has been reached and whether the debt ceiling has been raised. And I will see you again soon! Thank you for watching. I'm Carl Azuz for CNN Student News.