NEW YORK (CNNMoney)
Congress narrowly avoided pushing the country off the fiscal cliff. But it has done nothing to address the next and potentially bigger risk to the economy: the need to raise the debt ceiling.
To help separate fact from fiction in the battle, here’s what you need to know about the issue.
Why does it need to be raised? The debt ceiling needs to be raised for a simple reason – because both parties in Congress have approved tax cuts and spending increases over recent years, knowing full well this will add to deficit. Raising the debt ceiling then, ensures that we are able to pay for services we’ve already used. It is not a “license to spend more,” as some Republicans assert. It simply lets the Treasury Department continue to pay all the country’s obligations that Congress has already approved — whether it’s a payment to a federal contractor, a Social Security check to a senior, or interest on the debt to a bond investor.
HEY! DID YOU KNOW THAT…
- Since 1980, the debt ceiling has been raised 39 times:
- 17 times under Ronald Reagan,
- 4 times under Bill Clinton
- 7 times under George W. Bush.
- Congress was controlled by Democrats for most of those increases. However, Republicans never faltered when they were in control.
- The debt ceiling is not a spending ceiling. Administrations can issue all the checks it wants because the Fed simply creates money from thin air to make the deposits allowing your checks to clear.