Thursday, June 8, 2023

United States and its debt ceiling

The US is the country with the largest debt on the planet, it is as the Guatemalan singer Ricardo Arjona says, they have everything, but they have paid nothing, that is, they exhibit opulence and wealth, when the truth is that they owe more than they produce.

Right now the debt is 31.4 trillion dollars (it was the legal limit and was reached on January 19, 2023), while its Gross Domestic Product (GDP) is only 25 trillion, which means that its debt is about 130% of its GDP.

The first debt limit in the US was established in 1917 with the passage of the Liberty Bond Act. Since 1960, Congress has raised the debt limit 78 times to meet the government’s financial needs.

Over the decades, raising the debt ceiling has been a routine process, with lawmakers from the Republican and Democratic parties approving increases to prevent debt defaults. However, in recent years, the debate around raising the debt ceiling has become increasingly politicized.

In 2011, during the presidency of Barack Obama, the US faced a crisis situation when it approached the debt limit and Congress was embroiled in an intense political battle over the issue. Finally, an agreement was reached to increase the debt limit to 14.3 trillion dollars. Since then, there have been several additional debt ceiling increases. In February 2013, a law was passed to increase the limit to $16.4 trillion.

In October 2015, legislation was enacted temporarily suspending the debt limit until March 15, 2017. The debt limit was then reset to around $19.8 trillion. There was another debt ceiling increase in July 2019, when Congress agreed to raise the limit to roughly $22 trillion and then in 2021 it was brought up to the current figure. In the last 10 fiscal years, the federal deficit has averaged 1.2 trillion dollars, and the size of the debt went from 16.4 to 31.4 trillion dollars, which is the ceiling already reached and they want to increase again.

At the moment, the US is financing a war, that of Ukraine, (by January 2023 about 71,000 million dollars, including financial, humanitarian and military aid, and it has just announced more support at the G7 Summit in Hiroshima on May 20). and that’s why you want to raise the debt ceiling again. However, borrowing to pay back debt and waste money is not the solution and never will be.

One way out, perhaps the most sensible, is for the US to change its scheme of believing itself to be the world’s policeman and hegemon based on debts and accept that, as other countries have done, reduce its expenses, especially unnecessary ones, that is, in defense , in wars.


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