WASHINGTON, November 25, 2012 — The “fiscal cliff” has become the most ubiquitous phrase in Washington. But it is not the only crisis facing the United States. In fact, the fiscal cliff is not a cliff. It is more like a steep slope. The real cliff is the debt ceiling, and the existence of a debt ceiling law in the United States is fundamentally useless.
The fiscal cliff refers to the expiration of temporary tax breaks - the 2001 and 2003 Bush tax-cuts, and the payroll tax cuts enacted in 2010 - and the across-the-board spending cuts in various social programs and defense. Falling off the fiscal cliff suggests that if members of Congress do not reach a deal by the end of the year, the American economy will somehow plummet into the abyss. That is unlikely.
Warren Buffet, billionaire investor, in an interview with CNN said, “The fact they can't get along for the month of January is not going to torpedo the economy.” Regardless of when Congress reaches a deal to avoid the fiscal cliff, the United States will reach its debt limit sometime in the first quarter of 2013.
The debt ceiling is the maximum legal limit the U.S government can borrow at any given time. That limit is currently $16.4 trillion. The debt ceiling was established by the Second Liberty Bond Act of 1917, which helped finance the U.S entry into World War I. Since then, the debt ceiling has been raised almost 100 times.
So why have a “debt ceiling” at all if it has to be raised every year? Some argue that it forces lawmakers to focus on the national debt.
But Congress already has the power of the purse and can control how much the government can spend and receive in taxes. So having a statutory “debt ceiling” is pointless. It does nothing to control the national debt. If it did, it would not need to be raised every year.
Read full article: Time to abolish the debt-ceiling | Washington Times Communities