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"Debt," "Deficit," "Debt Ceiling," "CR," What Does It All Mean?

Understanding "Debt," "Deficit," "Debt Ceiling" and "CR."

Time for a little education. It is very frustrating to hear people, even in the news, use terms incorrectly.

The "Deficit" - this is the amount of money the government spends EACH year, in excess of the revenues that it takes in. The current administration has been running an annual "deficit" in excess of $1T ($1,000,000,000,000) annually since Obama has taken office!

The "Debt" (or the national debt) - this is the cumulative amount of money that the government has had to borrow since the beginning of the republic in order to pay the bills the government has run up! When Obama took office, the debt was just over $10T ($10,000,000,000,000). Today, not quite four years later, the "Debt" is $16.4T ($16,400,000,000,000) and growing. In other words, the Obama administration has added about $6T ($6,000,0000,000,000) to the "Debt" since he took office. That's a 60 percent increase in four years. George Bush is the second highest spender, having racked up about $5T ($5,000,000,000,000) during his 8-year tenure. So, in the past 12 years, our government has more than TRIPLED the national debt!

The "Debt Ceiling." This is a limit placed on the government by the Congress, on how much money the government can borrow. The current debt ceiling is $16.4T ($16,400,000,000,000), which means we've hit the ceiling and the government is not allowed to borrow any more money. Please keep in mind that this does NOT mean that the government cannot continue to operate. The government takes in about $2.5T ($2,500,000,000,000) in revenues every year. If the "Debt Ceiling" is not raised, the government could continue to spend $2.5T ($2,500,000,000,000) per year from its revenues. Service on the debt is currently running around $250B ($250,000,000,000) annually, so the government would still have the money to service the "Debt" (they would NOT default) and have $2.25T ($2,250,000,000,000) to operate the rest of the government. Since they are currently spending $3.8T ($3,800,000,000,000) to run the government, that means they would be forced to find ways to cut spending by $1.55T ($1,550,000,000,000) annually, if Congress refused to raise the "Debt Ceiling."

Again, the government WOULD NOT go into default! Any politician or media person who says otherwise (and Obama has already said this) is LYING to you!

The last term everyone needs to understand, because you will hear it a lot in the next couple of months is "Continuing Resolution," or "CR" for short. When Congress does not pass a budget that means it has not authorized any government agency to spend money. As you may know, the Senate has not passed a budget in over three years. How then, can the government continue to operate, you might ask. Well it is through the use of a "Continuing Resolution."

What a "Continuing Resolution" does, when passed by Congress, is to authorize expenditures based upon the CURRENT spending levels. The government has been operating under "CRs" for over three years now, which means that the government is spending at the level they were in 2009. If you will remember, 2009 is when TARP (Troubled Asset Relief Program) and all kinds of other "bailouts" happened, so what Congress has done with "CRs" is lock in the highest level of spending that the U.S. government has ever had, and this is why we are running $1T+ ($1,000,000,000,000+) deficits each year.

There will be a huge battle over the budget and the President is going to demand that Congress pass another CR in order to continue the current spending levels. If the Congress fails to pass a new "CR," that WILL trigger essentially a shutdown of the government and a default on our debt. This is exactly what happened in 1994 (although we did not have the debt part to worry about), and the government did shut down for a period of time. This means all but "essential personnel" are sent home on leave without pay! Interestingly enough, in 1994 when this happened, after the issue was resolved, the Congress passed a bill to retroactively pay all of the government workers for their "leave without pay", so in the end, it did not save the taxpayers one thin dime.

These terms get thrown around a lot, and often are improperly used. Way too often the "Debt" is called the "Deficit" and vice versa. It becomes confusing when the definitions have not been made clear. Hopefully, this will bring some clarity for those who do not follow these things as closely as others.



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