You hear it every day on the news. The debt ceiling. The national debt. The national deficit. Balancing the budget. Bill Clinton is still praised for having a budget surplus during his presidency. These terms are used so frequently and nonchalantly in the media that the average person may begin to think that they are interchangeable. In fact, each one is a completely different topic unto itself, and understanding what each one means can educate you against believing that they are actively trying to do anything about it. So, without further ado, Common Sense Conspiracy presents a common man’s assessment of these terms.
Debt ceiling — Before August of 2011, this term wasn’t tossed around much, but suddenly it was one of the biggest stories of the year. In the reporting of the debate in Congress on whether to raise the debt ceiling, the throwing around of all these terms was so prolific that you couldn’t hardly keep up with it with tally marks. And yet, so many Americans are unaware of what it means. Even more disturbing is that many Americans think that when the Republicans and Democrats finally agreed to raise the debt ceiling “temporarily,” that this meant something had been resolved. The reality is that the term debt ceiling is a pretty-sounding, professional word for “credit limit.” That’s right, just like the limit on your Visa card. The United States’ debt ceiling is a credit limit, the highest amount of money it can borrow legally. However, unlike your Visa card, this was not set by a bank or the party loaning the money. The debt ceiling was set by the government itself. Meaning, the United States sat down and decided at what point what was the highest amount of debt that could be amassed. At that point, the faucet is supposed to be turned off and no more money can be borrowed. However, when the debt ceiling was actually in danger of being reached, there was little else to do but to reconsider and open the debt floodgates again. That got us through the remainder of 2011. Now, President Obama is already asking to up it some more for the first quarter of 2012, demonstrating that nothing has changed except the amount we are borrowing goes up, up, and up.
National debt — The national debt is another term that gets lots of play in the media. The national debt is fairly simple…this is the amount that the United States owes to multiple parties at any given moment. The national debt is just like when you sit down and figure how much in the red you are at the end of the day. It’s the amount of debt you are carrying when all factors are included.
National deficit — A lot of people confuse the national deficit with the national debt. While they are very related, they are two very different things. When you balance your checkbook, you reconcile everything and hopefully have some funds left over when you get done. If you are the United States government, this hasn’t happened since 2001. President Bill Clinton famously balanced the budget, creating a surplus from 1998 to 2001, leaving office with the surplus intact. The national deficit is the difference between how much the government spent and how much it took in, mainly through taxes paid by citizens. If this is a positive number, we have a surplus, and if it is negative, we have a, you guessed it deficit. It is a deficit so commonly that the term national deficit is used to represent it, assuming that it will be a negative number most of the time. Since 1940, there have only been 12 years where there was a surplus, which is why you don’t hear the term national surplus tossed around very often.
Balancing the budget — Politicians love this term. Balancing the budget is a frequent campaign item, encouraging people that this somehow fixes all our problems. Democrats frequently refer back to President Clinton’s achievement with pride. Balancing the budget is simply making sure that the amount spent by the government does not exceed the funds available, resulting in a surplus. Bill Clinton did do a great thing by making sure the budget was on the positive side during his term, but in our next article, we will look at how much of a surplus was created and how insignificant it is in the grand scheme of the national debt.
About James Smith
James is a father of four and grandfather to four cute little bugs. He and his wife Beautiful Gorgeous, of almost 30 years, have been prepping since 2003.
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