If you’ve seen a newspaper or had the misfortune to have a television tuned to a news station in your vicinity over the last few weeks, you may have heard that the big topic in Washington, D.C. has been the “debt ceiling” negotiations. What the heck is a “debt ceiling”? I’m glad you asked!
It turns out that the United States government spends a lot of money. The House of Representatives, the “people’s house” half of our two-body Congress, has the power to allot money to be spent on, well, anything, really. That means roads, military equipment, social security, schools, law enforcement, all sorts of things get money from the federal government through the House of Representatives “appropriating” the funds for whatever project or program they decide. Over the course of U.S. history, however, the nation has consistently borrowed money in order to pay for these things. Instead of paying for everything the country spends money on through income (taxes, fees, and funds of that nature) some of the money comes from borrowed money, largely from foreign nations.
One of the rules that Congress has is that they need to raise the limit of how much money can be borrowed in order to keep up borrowing money, in order to keep spending it on things. Last week, the government was going to reach that limit, on August 2nd, and the government claimed that some payments would not be able to go out, putting further strain on the already suffering economy. Certain members of Congress objected to raising the limit of debt, saying that to do so would further dig the country into an economic hole, and not get federal spending habits under control. These folks weren’t budging, and that led to weeks of uncertain negotiations, with the news media following raptly.
However, the folks in Congress are elected (so they don’t like when people get mad at them), and they came to the decision that it was important for the government to keep sending out money according to schedule, especially when things like Social Security checks and military paychecks were possibly going to be withheld in the event that the limit was not raised in time.
The resulting compromise created a committee to study spending and income, and to propose changes to balance the two, in order to reduce the deficit (the gap between how much we spend and how much we take in). The committee won’t reach their conclusion for weeks, so for now, this whole situation will be ignored until it blows up again and takes over everyone’s attention.