By: Sahar Maleki

If you’re like me, you have heard a lot about the debt ceiling this past month and wondered what it means or how it would affect us, the younger generation. 

What Is the Debt Limit?

About a century ago, our government needed Congress’s approval for every expenditure. This was not only inconvenient, but also wasted the Congress’s time. Therefore, a law was passed and the United States instituted the first debt limit through the Second Liberty Bond Act of 1917. Since then, there has always been a limit on the amount of national debt that the treasury can incur, with the current cap standing at $28.4 trillion. 

Our government has an annual budget that gets approved by Congress every year. Using this budget, the government pays the federal workers and a variety of other expenditures as well as for programs such as social security. Its main source of revenue: taxes. When the government spends more than it collects from taxes or other revenues, they need to borrow and if they continuously borrow year after year, the budget deficit grows and eventually it will reach the debt limit. Once this happens, Congress will have to debate and either raise the debt ceiling or risk defaulting. Since 1960, Congress has voted 80 times to raise or suspend the debt ceiling and it has always reliably voted to raise it, therefore avoiding a default. 

What Happens If the Government Defaults?

As a teenager you might be thinking: this won’t affect me anyway so why should I care? In reality, this is a bad situation that impacts the younger generation even more than the older one. For years, the country’s budget deficit has grown as a result of overspending. The government has been increasingly spending more and collecting less as big companies such as Amazon have figured out loopholes to lower their taxes immensely. The COVID pandemic has made the situation worse as many people have lost their jobs over the past 18 months and have had to collect unemployment and use government funded services to survive. 

Faced with a growing budget deficit, either the debt limit needs to increase so that the government can borrow to pay for its obligations or it will go into default. If the government defaults now, a variety of programs will be halted and the economy will falter. For instance, the social security or child tax credit checks or veterans’ and military service families’ paychecks will be stopped or delayed. What’s worse, the value of the dollar will drop and the United States will lose credibility on the world stage. However, when the government keeps on spending and increasing the budget deficit, at some point the future generations will be penalized by facing financial burdens and increased taxes or through the loss of benefits such as social security. 

What Can Be Done to Fix the Situation?

To lower the budget deficit and avoid future debt limit increases, the government needs to increase its revenue, lower its expenditure and grow the economy. So far, all these methods have proven difficult and complicated. Raising taxes can hurt the economy in the long run and there is a limit to how much the government can cut funding its programs or the extent to which it can grow the economy. The solution, however, may lie in all of the above as well as in educating the population. Politicians respond to their constituents and informed citizens have the power to demand the politicians to do better to fix these problems.

Posted by:hbinretrospect

Reporting not for school, but for life.

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