The Debt Ceiling Crisis in Plain English

So there has been a lot of upheaval over the debt ceiling crisis in the United States. The only thing is, most people don't actually understand what the crisis is all about. So, here it is, broken down into plain English.

In 1913 when the Federal Reserves (the central bank of the United States) was created, a debt ceiling was created. This debt ceiling was the highest amount of money the United States was able to borrow. Since then it has been raised 63 times by Congress. This past week the United States has reached its limit yet again, so the question has been on the table in Congress whether or not to raise it again.

Right now 40% of the money needed to fund the United States and all of its expenses (including war, medicare, Medicaid, federal jobs, etc.) is borrowed. This means that the United States cannot continue functioning as it is now. Either we need to raise the debt ceiling and go into more debt, or spending needs to be cut. Pretty simple.

So where is the crisis?

The crisis itself doesn't actually come from this issue. The crisis comes from Congress stalling and not solving it. The crisis comes from The President, the representative of the United States of America, announcing to the world that we will default (not be able to pay the interest on our loans) if the debt ceiling is not raised, which is bad in two ways. The first being that this is a lie, we do have the funds to keep us from defaulting. The second being that foreign countries are not going to risk loaning money to a country that announces it can't make its payments.

Economist Peter Schiff, who predicted the economic crisis years before it happened (even though other economists insisted he was wrong) has said that the government should cut spending. He says that, "the real cost of government isn't what it taxes, it's what it spends."

I have heard it said the past few days that raising the debt ceiling or not raising the debt ceiling are both like re-arranging the chairs on the Titanic. Either way, its going down. This crisis is just a symptom of an economic system that is not working.

We need to get to the real source of the problem.