Understanding The United States Debt Limit System [Video]

Geekdom is all about knowledge, hence the reason I’m posting this. As a Canadian, the American “debt limit” system seems totally nonsensical to me, but at least I understand how it works now. I don’t envy the role of the president in this, it seems like he’s in a pretty nightmarish position (according to this video.)

[C.G.P. Grey]

9 Responses to Understanding The United States Debt Limit System [Video]

  1. Don’t accept that as the way it is. The easiest thing to point out is that the president nor congress has proposed a budget in years. There are several other glaring failures in the video, but that premiss dismisses the basis of the rest so moot point. Also, when the congress is during what the president asks, then it isn’t behaving in conflict with each other as demonstrated in correctly in the video.

  2. This is not technically correct. Upon reaching the debt limit, all spending does not stop, as implied in the video. The President would start to allocate spending on some things but not others, or Congress could redirect spending. For example, paying interest on treasury notes and cutting spending on entitlements would not put the US in default of its debt.

  3. For what its worth, if you really consider yourself a geek, taxes paid to the US government pay for nothing. The US is the monopoly issuer of a fiat currency: whenever it spends money, in the act of spending it creates money. Whenever it collects taxes, and this is true of taxes only at the US level, States and localities are users not issuers of the currency while the US is the issuer, the US is destroying money. If your simple act of spending creates money, the first reason you bother to tax is to create a demand for the money you’ve already created by spending, the second, in a rational nation, which is to say one other than the one we have, would be to discourage things you don’t want people doing with your money. Irrational as we are here in the US, primarily we tax people for earning incomes while we give em a break if it came from speculation on Wall Street, which is to say they didn’t really earn it.

  4. “while we give em a break if it came from speculation”
    Not so, they are making money due to the fact that they took the risk and had the expertise to choose correctly.
    They also used money that has already been taxed once and invested it. So they pay taxes, get money, invest it, pay more taxes on that money. Then from there they take those earnings and pay property, tax sales tax, self employment tax many times, privileged taxes… then hope you get to enjoy some of it before you croak and your family experiences inheritance tax.

    I have saved up and built a new business. I hired 5 people to help in my first year last year. I put everything I could back into the business for my and their security and to grow the company. I had $3k left in the bank. Looks like I am going to owe over $5k in taxes and my accountant is $1500 to tell me that. That doesn’t even mention the hundreds of hours of paperwork to stay current with the various government agencies. We all pay too much. Cut spending!!!!

    • Taxes are at their lowest points in decades. We can’t define tax rates based on how much money you thought you needed to save.

  5. Income taxes are at their lowest point (in a few decades), but when you add in other taxes the typical american pays more now than even a decade ago before you even factor in the devalued currency and its shrinking buying power.

    Tax rates aren’t based on anything is the issue. They are based on the whim of congress.

  6. Sadly this is very misleading. First of all, we have never spent less than we take in (including Clinton, look it up). We are allowed to do this because we can print all we want from the Federal Reserve which is beyond the government (look it up). So in effect, we as non-politicians are screwed because they can do whatever they want (look it up). So our only option is Libertarianism and Austrian economics (look it up).

  7. One thing the video failed to mention is that no budget has been passed in four years. Plus a budget doesn’t look like it will be passed this year either. No one can agree on one cause the country is so divided.

    Also the debt ceiling is a wonderful idea. It is supposed to stop the country from borrowing so much money they could never pay it back. But we passed that point ages ago. Cut spending!

  8. While the video above does correctly show the peculiarities of the budget interaction between the Congress and the Executive Branch, it does not address the problems associated with maintaining and increasing such high levels of debt. As a response to this problem, I present the following: http://www.youtube.com/watch?v=ID4xay5RITY