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January 07, 2013 at 03:16 AM
Most of us have a limit to the amount of debt we can amass based on our credit history, outstanding debt and annual income.
Prior to 1917, the U.S. government could only issue debt if Congress approved it. Hence, Congress had control over the amount of debt the federal government could accrue. In 1917, Congress passed the Debt Ceiling Bond Act which allowed the executive branch to issue bonds without Congressional approval. Since that time, the debt ceiling has been raised on numerous occasions and very soon the U.S. will be faced with this decision once again.
The present debt ceiling stands at $16.394 trillion and, while we are only $63 billion shy of that, most observers expect we will hit the ceiling sometime in late February or early March. Although we averted the fiscal cliff recently, the debt ceiling could be as much of an issue as was the cliff. Here’s the point. The larger government becomes, the more debt it amasses, the more tax dollars it will require to pay its bills and fund its operations. This would result in a greater tax burden levied on the American people and less capital in the private sector to spend and invest. This scenario would also stymie demand.
