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  • Debt Limit Increases to Nearly $16.4 Trillion

    At the close of business, the federal government’s debt limit will increase by another $1.2 trillion, the final installment in a series of hikes that started last summer.

    This last increase, from $15.194 trillion to $16.394 trillion, was essentially granted in the Budget Control Act (BCA) of 2011, passed August 2 at the culmination of the debt limit debate. Last week, the House rejected the debt limit increase in a resolution of disapproval, but the Senate blocked that legislation. The BCA states that unless both legislative bodies agree to reject the scheduled increase and no Presidential veto follows, then the increase will go into effect.

    So this was expected. Yet now more than ever, Congress has work to do. It must make tough decisions to steer the nation in a new, fiscally responsible direction.

    Though some question the value of debt ceiling votes, they are a useful exercise, as they force Congress to confront the consequences of reckless spending, which would be lost if the limit increased automatically. This check on the nation’s level of borrowing therefore serves an important, albeit painful, function. As The Heritage Foundation’s J. D. Foster describes the situation:

    A change of course in federal spending is inevitable. The question is whether it will be orderly, beneficial change brought by design or disorderly, harmful change brought by disaster. Reaching the debt limit provides the critical moment to force the necessary action to reduce spending and borrowing.

    This most recent increase of $1.2 trillion is practically automatic, taking the pressure off of Congress at a time when it should be taking steps to swiftly rein in runaway federal spending.

    There is a lot to do to get the nation’s fiscal house in order. Before the ink on the BCA was dry last August, Heritage President Edwin Feulner spelled out Congress’s charge: come up with solutions that “drive spending down toward a balanced budget, reduce the share of the economy devoted to public debt, preserve America’s ability to protect the nation, and shift to a job-creating tax system without raising taxes.” This is Congress’s crucial job this year.

    Other than insisting that the rich pay their “fair share,” which The Heritage Foundation has explained is “Fair to No One,” President Obama’s State of the Union address this week did not contain any ideas to get spending and deficits under control. Instead, he proposed even more spending, which of course has to be paid for through higher taxes or borrowing. Doing either will harm the economy further and do nothing to lower the level of debt. Publicly held debt represents about 70 percent of gross domestic product and, driven by expanding entitlement program spending, is on track to surpass 100 percent within a decade, as this chart illustrates.

    The credit markets will not stand for this, because they know that a country cannot thrive economically with debt levels that high and rising.

    Congress and the President should not let this happen. America needs bold solutions now that solve the spending and debt crisis. Now is the time to change course.

    Posted in Featured [slideshow_deploy]

    18 Responses to Debt Limit Increases to Nearly $16.4 Trillion

    1. Bobbie says:

      …and a course of action that's followed with integrity!

    2. Blair Franconia, NH says:

      All right, here's MY SOLUTION to our debt bomb. We can defuse it by having members of Congress serve only
      one term. Two years for members of the House, six for the Senate, and pass a law saying that the money they've raised for the reelection, should be turned over to the Treasury Department as a down payment on the national debt. Also, the law should be that Senators and Representatives, shouldn't be allowed to enrich themselves. They should return home and resume the jobs they had before they went to Washington. One final thing: Congress should cut the debt not by $1.2 trillion dollars, but by $10 trillion dollars. Easy as pie, or if you're mathematically inclined, which I'm not, easy as pi.

    3. Janalisa says:

      Our Congressional leaders want to decrease Government debt on the backs of Social Security and Medicare beneficiaries, but do nothing about the many Federal employees who receive not one, but two retirement pensions funded by the Federal Government. This blatantly immoral behaviour continues at time when many Americans have no retirement pension, except Social Security. These people, many of whom work for the Government entities tasked with protecting taxpayer dollars from Government waste and abuse, believe themselves to be above the rules because they engage in nepotism, cronyism, and elitism. To get serious about gaining control over the budget, Congress and the President need to start by buying a few brooms and starting sweeping some of these agency heads out the door.

    4. Jeff, Illinois says:

      Thanks to the Bush Tax cuts, it will be impossible to get the budget back on track!!!

      • How will increasing taxes get the budget back on track?

      • Stirling says:

        I feel sorry for you Jeff, thinking that people keeping more of their hard earned money is a bad thing.. If you enjoy paying federal taxes every year (on your hard earned income) then you are in the minority. But I would assume that you are part of the 48% that don't pay any. btw – Once the Bush Tax Cuts expire you will also realize your taxes will increase (under all tax brakets, not just the highest). please ask your DNC rep if they realize this fact.. thank you.

      • Emily Goff says:

        Jeff, Thanks for your comment. I'd like to point you to a piece our former Budget Fellow Brian Riedl wrote, which looks at the argument that the 2001 and 2003 Bush tax cuts are to blame for current budget problems: http://www.heritage.org/research/commentary/2010/

        The bigger problem, of course, will be rising spending on the major entitlement programs, which are projected to drive future annual deficits in coming decades.

        • Jeff, Illinois says:

          Circular argument using the right wing bible to defend the right wing bible.

          • mick68 says:

            If the Bible is a lie, why does it irritate you so much and why do you take the time to comment on it?
            I guess you'll call this circular reasoning or make up some other excuse to pardon yourself.

      • Jeff, Illinois says:

        You see . . here's a brand new concept . . when you have more revenue coming in . . you have more money to pay down the debt. It's a brand new math . . and it's sweeping the nation.

        • Bobbie says:

          why reward incompetence with more money? always the answer of the left wing bible bangers. do you live in debt? Do you steal from your neighbors to pay it off? or are you one of the government inferior who act the fool who's actions doesn't have accountabilities to own up to where government has a "special" program to support your inferiority? thieve the masses so we can feed government money cause government is so trusted. They do an excellent job attempting to look productive, plowing clear roads in thawing temperatures, ruining the pavement for their summer project of construction. talk about circular and nonproductive. hey, everyone gets paid. makes perfect sense. doop de doo…

    5. Laura Henning says:

      I don't understand your chart. Our annual GDP is about $13 trillion and our current federal debt is about $16 trillion, yet the CBO doesn't project our debt to equal our GDP until 1223. Will somebody please explain that?

      • Emily Goff says:

        Part 1: Fantastic question, Laura, and one that many people have. You're right that our total federal debt (also referred to as gross debt) to GDP ratio is at 100% and rising. However, the total federal debt is made up of two types of debt: 1) Debt held by the public and 2) intragovernmental debt. The first type (referred to as debt held by the public OR publicly held debt) is the debt the government has sold in the credit markets. The second type is debt the federal government has issued internally. An example would be a transfer from the general fund to Social Security.

    6. Emily Goff says:

      Part 2: The 70% debt-to-GDP figure I cited above from the CBO refers to debt held by the public, which is the debt that the credit markets care about. Debt held by the public is projected to reach 100% of GDP in the early 2020s. CBO does provide estimates for gross debt, but it gives most of its attention to debt held by the public.

      The confusing thing is that the debt limit, which is the statutory limit on the amount that the U.S. government can borrow from credit markets, is tied to the gross debt. I'd encourage you to take a look at this paper by my colleague, J.D. Foster, which explains these types of debt in the larger context of the debt limit: http://www.heritage.org/research/reports/2011/01/

    7. steve h says:

      Remember this piece from 2001 when Heritage argues that we shouldn't pay down the debt and deficit so quickly and that the surpluses would be too big and we wouldn't knwo what to do with all the excess money…and then argued we needed large tax cuts? http://www.heritage.org/research/reports/2001/02/

      How quickly conservative policymakers and think tanks forget their own arguements and contradict themselves. 1st deficits and debts don't matter, surpluses are bad – need huge tax cuts… when the Dems get in control – scream about deficits and debts. Well you certainly have fooled a lot of Americans. Kudos Heritage!

      • Bobbie says:

        and in your world there's no such thing as "consideration" right, steve h? the president hasn't done anything someone hasn't already done except kill bin laden. What he does is reckless to fill his agenda, ignorant to ANY "considerations" so he can point fingers. he did it so I can!!!

        you keep voting for the adult juvenile delinquents party of destruction to America because the weak won't shake it off and democrats don't give them any reason!! More faith in the government that shows themselves corrupt over your fellow American, sure says alot.

      • Jeff, Illinois says:

        Steve h . . on track as usual . . thankyou!

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