Understanding the U.S. National Debt: What Biden’s Bill Really Means and How It Impacts Our Economy

Since President Biden signed a bill suspending the debt limit, the U.S. national debt has astronomically increased by 1 trillion in just five weeks, a staggering figure that has taken many by surprise. Conventional wisdom suggests that raising the debt ceiling leads to increased national debt, but this is a misconception. Let’s delve into the actual dynamics and implications of this issue.

The Role of Congress and the Budget

Contrary to popular belief, Increasing the Debt Ceiling does not 'raise debt'. Rather, it enables the Department of the Treasury to continue borrowing to fund spending that has already been authorized by Congress and the President, through the federal budget. The crucial point to understand is that raising the debt ceiling is a necessary procedural step to ensure the government can meet its financial obligations, but it doesn’t create new debt.

The fundamental solution to reducing national debt lies in cutting discretionary spending proposed by Congress and the President. Approximately 1.3 trillion dollars of the annual federal budget is earmarked for defense spending. Therefore, reducing war-related spending is one of the most effective methods to lower the budget. This underscores the necessity for Congress to reconsider its priorities and the justification for continued and escalating military expenditure.

The Reality of the Debt Limit and Inflation

Uncle Sam can freely borrow money, and inflation is a direct consequence of this borrowing. The current national debt ceiling has been raised to 33.5 trillion dollars, indicating a significant increase. The misconception that raising the debt ceiling increases the overall debt is debunked here. It is merely a regulatory mechanism that allows the government to finance existing authorized spending.

It is critical to recognize that continued deficit spending, funded by new debt, is prevalent in many government operations. This is known as deficit spending, where ongoing government functions and existing debt repayment require new borrowing. Without raising the debt ceiling, the government would face severe ramifications, including default on its debts or failing to meet its financial obligations. Default would trigger a downward spiral in the economy, leading to global financial instability and severe economic repercussions.

Meeting Fiscal Goals: A Comprehensive Approach

The ongoing fiscal challenge requires a multifaceted approach. Tax increases, spending cuts, and borrowing are the three main strategies to address the growing debt. While a balanced solution would involve a combination of these measures, the current scenario necessitates borrowing to sustain government operations.

To bridge the financial gap, the public might support a significant tax increase, which could yield close to a trillion dollars. Alternatively, eliminating all military spending could also approximately halve the deficit, leading to a situation where borrowing becomes unnecessary. However, these drastic measures are politically challenging to implement, especially during an election cycle.

Some argue that ceasing to pay bills and defaulting would be disastrous, yet nearly 20% of our government operations, including debt repayment, are currently financed through new borrowing. This ongoing deficit spending perpetuates the cycle of increasing national debt.

Conclusively, a solution involves both reducing government spending and raising taxes. While these measures may be politically contentious, they are necessary to address the current fiscal challenges faced by the United States. Congress must take decisive action to cut spending and raise taxes to ensure the long-term financial stability of the nation.