Federal Debt Ceiling

The debt limit was put in place to prevent the Treasury from issuing new debt to cover short term bills. Congress implemented the first debt limit in 1917 as part of the Second Liberty Bond Act. The law delegated the approval of individual bonds to the Treasury, but still allowed Congress to have control over the country's finances. The limit applies to debt issued to the public and debt borrowed from the government's accounts, such as Social Security, Medicare, Transportation and Civil Service Retirement funds.

The debt ceiling has been raised or extended 78 times since 1960, 49 times under Republican presidents and 29 times under Democratic presidents, including 3 times under President Obama and 7 times under President George W. Bush.

With the federal government closing in on its legal borrowing limit, President Obama and Congress are in the midst of an intense debate over the nation's spending and borrowing practices.

The U.S. dollar is the world's reserve currency, with many countries around the globe basing their money on the greenback. Many international commodities, including oil, are priced in dollars. This allows the government to borrow at lower rates and U.S. business to purchase foreign goods at lower rates. These advantages are in part because the dollar is considered the safest currency in the world. A government default would damage that confidence.

The credit markets need government bonds to be risk free. A delayed payment could send interest rates soaring, making it difficult for businesses to get credit to grow and homeowners to pay their mortgages. Housing prices could fall and the economy could slow dramatically.

Sarah Palin is inspiring fear.  She is doing all she can to take advantage of the lack of understanding the general public has concerning the debt ceiling. She is hoping that people will confuse raising the debt ceiling with raising the national debt.  Is there any dispute that the United States should continue to be responsible to pay the debt the United States HAS ALREADY INCURRED?! Sarah Palin is accusing President Obama of trying to “scare” the American people regarding the failure to raise the debt ceiling. The American people should be scared of NOT raising the debt ceiling.  Failure to raise the debt ceiling would ensure default.  Nothing would guarantee economic failure faster than default on our existing debts.  Palin’s comments are clearly designed to promote an economic disaster for the country.