What is the Debt Ceiling•Under federal law, the amount up to what limitthat the government can borrow to meet thedeficit budget is the Debt Ceiling.•This concept was introduced at time of WorldWar l .•These borrowings are done by the departmentof the Treasury
Process of Debt Ceiling• Debt ceiling can increase by the vote of congress• To change the debt ceiling, Congress must enact specific legislation, and the President must sign it into law.
Contd….• The process of setting the debt ceilingis separate and distinct from the regularprocess of financing governmentoperations
The debt ceiling has been raised 74 timessince March 1962including 18 times under Ronald Reagan,eight times under Bill Clinton, seven timesunder George W. Bush and three times (as ofAugust 2011) under Barack Obama.
Treasury view-According to the Treasury, "failing to increasethe debt limit would . . . cause the government todefault on its legal obligations – anunprecedented event in American history".These legal obligations include paying SocialSecurity and Medicare benefits, military salaries,interest on the debt, and many other items
Critics view Debt ceiling crisis is "self-inflicted”. It is a routine work of treasury. it was used to score political points for the minority party.
Different Issues to Resolve the ProblemDemocratic party and Republican party havegiven important points to come out from thiscrisis in few monthsAmerican President has told that I needsupport of both the parties to represent theview of American people what they want ?
Increase the limit of According to debt ceilingparty republican from This pointto 14.29 proposed by (opposition party) 12.93 American President trillion dollar Because are demandingexpending more They it is not about a ceiling on such borrowing they believe that such money the raising the debts ceiling its simply ability to pay treasury bills burden borrowing will increase the debt On future generation without helping the economy.Democratic Party Republican Party
According to democratic SENATE has given party two options (these borrowing will help in future) 1. A balance budget amendment is sent to 1. will invest in thousand of project all states 2. it will increase employment. 2. The joint committee cuts spending by 3. Demand of goods and services will greater amount then requested debt increase ceilingDemocratic Party SENATE
The republican According to party proposed democratic deficit party reduction plan TheIf govt. reduction commission planed to deficit would reduce the expenditure it $3.8 trillion for goods and services would demand deficit-cutting plan. reduce.Democratic Party Republican Party
According to democratic party According to (reduction in republican unilateral party expenditure) For next 10 year If thisReduction in Defense the lenders 1. will happen most of wouldmedical 2. get uncomfortable in holding US bondsroad would want start selling the 3. and bonds govt. would reduced $733 billion. TheDemocratic Party Republican Party
According to Democratic party Tax reform should be (agree but they want to considered reform tax after few year) Because……?? Ifif taxgovt.reform increase the tax the will would the govt will get $751 billions. right now the demand of goods and services of the people at large would reduce.Democratic Party Republican Party
? Directly question to the American people People can mail ,tweet directly to us that will keep pressure on Washington (Senate)to move out from this crisis.Democratic Party
o U.S. military salaries and retirement ; o Social Security and Medicare; If borrowing ceiling limit will o federal civil service salaries and retirement ; o individual and corporate taxthese things not increase than refunds; o unemployment to states; may happen o defence vendor payments; o interest and principal payments on Treasury bonds and other securities; o student loan payments; o Medicaid payments to states;Democratic Party
Agreement1. The agreement cut spending more thanit increased the debt limit.2. The agreement established a Congressional JointSelect Committee that would produce debtreduction legislation by November 23, 2011.
3. The goal of the legislation is to cut at least $1.5 trillion overthe coming 10 years and should be passed by December 23,2011.4. Congress must vote on a Balanced Budget Amendmentbetween October 1, 2011, and the end of the year5. Projected revenue from the Joint Select Committeeslegislation must not exceed the revenue baseline producedby current law
6. The agreement specified an incentive for Congress to act. IfCongress fails to produce a deficit reduction bill with at least$1.2 trillion in cuts, then Congress can grant a $1.2 trillionincrease in the debt ceiling7 . The debt ceiling may be increased an additional$1.5 trillion if either one of the following two conditions aremet: 1-A balanced budget amendment is sent to the states 2-The joint committee cuts spending by a greater amount than the requested debt ceiling increase
CONSEQUENCES1. If U.S government does not increase the debt limitit will cause catastrophic damage to the economy .2. To reduce deficit American government has toincrease the tax rate on middle class people whichthey don’t want to do so .
3.If debt limit doesn’t increase it will negatively effect thedominant rate of dollar in U.S market & also it will effect the worldeconomy . 4. The dollar is expected to be weaker in forex market , If debt limit doesn’t increased . 5. If debt limit is not increased there is med rush of money into safer physical assets such as GOLD , METAL & OIL .
6. If debt limit will not increased it will effect payment onbroad range of benefits and U.S obligation would bediscontinued limited & adversely affect included : - U.S military salaries and retirement benefits . - Interest and principle payment on treasury bonds & other securities. - Medical payment to the states .
FUTURE PLAN AGAINST DEBT CRISIS1. There is $ 1 trillion in spending cut over next 10 year.2. By the end of December congressional committee will have findsomewhere else to cut $ 1.5 trillion .3. U.S government will also reduce their spending on healthcarelegislation and increase the tax rate .
4. If U.S government increased minor tax rate it willincrease $ 3.6 trillion government revenue .5. Mr. president has to make their debt marketoptimistic .