Understanding The Debt Ceiling And Its Effect On America
Regardless of your involvement in finance, you likely heard the nationwide discussion happening about our national debt crisis, as well as the fevered debating of assorted solutions put forth by government officials and political pundits alike.
Recently, the debated centered on the issue of whether or not the national debt ceiling should be raised (both in this instance, and in general as a means of saving our national credit rating). Congress agreed to do so in order to avoid long-term effects on that crucial international credit rating (which, ultimately, did not entire curb the effects of our debt issues on our nation's financial standing). Much like in our personal finances, if our credit rating falls, so will the level of trust other nations have in our ability to pay off our debts.
For some, this decision was met with relief, or with fury, depending on political perspectives, financial beliefs and party affiliation. But for many Americans, the issues revolving around the debt ceiling debate as well as the exact answer as to what the ceiling itself actually is are surrounded by a cloud of mystery. In short, many are left asking themselves what is this debt ceiling, why is its activity important, and how will raising it affect us?
The easiest way to shed some light on the matter of what the debt ceiling is and the function it serves is to call it by its other name debt limit. Basically, a debt ceiling is a limit place on the amount of money that can be borrowed from foreign governing bodies. If it helps, imagine that the debt ceiling is an impossibly large credit card limit. Raising the debt ceiling is akin to requesting a credit line increase.
When you view it that way, the question of how such actions could affect us, and why anyone would want to do so in the first place, both become easier to understand. Let us continue using the credit card analogy. If you max out your credit card that is, you spend beyond the maximum amount allowed under the terms of your card raising the line on your card will give you additional money to borrow from the institution issuing the card. However, if you're unable to ultimately repay your debts, your credit score will get lower a consequence that could have serious long-term effects on your finances, especially as the importance of good credit increases parallel to the raising of the lowest "acceptable" credit score for general approval. America would have this same problem on an international level if it is unable to keep up with the amount of debt its allowed to acquire through raising the ceiling.
The debate, like most other political debates, also extends into the blame game in which both dominating governing parties seem to enjoy engaging. This is also a relatively general answer, the issue itself having more nuances and details than we've explored thus far. However, this will at least offer you some insight into what this issue is, and why it's worth time and consideration.
Recently, the debated centered on the issue of whether or not the national debt ceiling should be raised (both in this instance, and in general as a means of saving our national credit rating). Congress agreed to do so in order to avoid long-term effects on that crucial international credit rating (which, ultimately, did not entire curb the effects of our debt issues on our nation's financial standing). Much like in our personal finances, if our credit rating falls, so will the level of trust other nations have in our ability to pay off our debts.
For some, this decision was met with relief, or with fury, depending on political perspectives, financial beliefs and party affiliation. But for many Americans, the issues revolving around the debt ceiling debate as well as the exact answer as to what the ceiling itself actually is are surrounded by a cloud of mystery. In short, many are left asking themselves what is this debt ceiling, why is its activity important, and how will raising it affect us?
The easiest way to shed some light on the matter of what the debt ceiling is and the function it serves is to call it by its other name debt limit. Basically, a debt ceiling is a limit place on the amount of money that can be borrowed from foreign governing bodies. If it helps, imagine that the debt ceiling is an impossibly large credit card limit. Raising the debt ceiling is akin to requesting a credit line increase.
When you view it that way, the question of how such actions could affect us, and why anyone would want to do so in the first place, both become easier to understand. Let us continue using the credit card analogy. If you max out your credit card that is, you spend beyond the maximum amount allowed under the terms of your card raising the line on your card will give you additional money to borrow from the institution issuing the card. However, if you're unable to ultimately repay your debts, your credit score will get lower a consequence that could have serious long-term effects on your finances, especially as the importance of good credit increases parallel to the raising of the lowest "acceptable" credit score for general approval. America would have this same problem on an international level if it is unable to keep up with the amount of debt its allowed to acquire through raising the ceiling.
The debate, like most other political debates, also extends into the blame game in which both dominating governing parties seem to enjoy engaging. This is also a relatively general answer, the issue itself having more nuances and details than we've explored thus far. However, this will at least offer you some insight into what this issue is, and why it's worth time and consideration.
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