When President Obama starts talking about debts and deficits, most young people are likely to tune out.
If he’s talking about basketball, Facebook or music, that’s when we tend to pay attention.
The newest debate which has taken over the mainstream is the decision regarding the American debt ceiling: should it be raised or lowered?
So what exactly is the debt ceiling?
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Let’s start with our national debt, which continues to grow and is now at $14 trillion dollars, which we constantly borrow from. Now imagine you had a credit card with a $14 trillion limit and now, that same credit card is maxed out.
So like the Notorious B.I.G. once said, “a strong word called consignment.” We’re pretty much consigning on our own money, we borrow and borrow but never pay off.
Where the debate takes shape is whether or not we should raise the limit so we can keep on borrowing money, or keep it the same and face uncertain consequences.
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Now, President Obama is serving as the negotiator in late night sessions to determine what to do and what is the best possible deal for the country. One thing is for certain, if the limit isn’t raised, the United States will risk going into default, well at least according to the U.S. Treasury Department.
Congress has until around August 2 to raise the legal limit on debt.
What will happen if the ceiling isn’t raised? Take a look.
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No More Medicaid?:
Long standing programs may come to an end. The law requires the U.S. to continue payments for entitlement programs such as Social Security and Medicaid, but they can’t borrow money to pay for them, so the future of Social Security and Medicaid may be in jeopardy.
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Getting Higher:
If the ceiling isn’t raised, it could mean higher mortgage rates and borrowing costs for every American which would drag down the economy.
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Crash & Burn:
Leading economists feel that as interest rates rise, it could create a market panic and lead to another stock market crash similar to 2008. The fear of the unknown is the biggest scare to overcome.
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Another Stimulus?:
If the ceiling isn’t raised, it may lead to the government stabilizing the market once again. More money panicking would then take place. If a large fund has to halt redemptions, like what happened three years ago, it would worsen the panic and possibly require the government to step in to stabilize the markets.
