Home > Economics, Politics > The Basics: Understanding Concepts Behind the Budget Battle

The Basics: Understanding Concepts Behind the Budget Battle

Wednesday, October 2nd, 2013 Leave a comment Go to comments

Since almost all print and tv/online news sources are covering the play-by-play on America’s budget battle, here are simple explanations of the basic terms being tossed around in the debate about a government shutdown, raising the debt ceiling and cutting federal spending, courtesy of The Wall Street Journal.

What’s a budget deficit?

The deficit is the difference between government spending (on everything from defense to Social Security) and government revenue (brought in through taxes, fees, etc) over a set amount of time. Through the first 11 months of the fiscal year ending Sept. 30, the federal government spent about $3.2 trillion and brought in a little less than $2.5 trillion in taxes and other receipts. So the deficit reached $755 billion, down from nearly $1.2 trillion during the same period a year earlier.

What is debt?

Debt is the accumulation of deficits. Any budget deficit, no matter how small, leads to more total government debt when the Treasury sells debt (bills, notes and bonds) to cover the shortfall between revenue and spending. Federal debt has been growing steadily for decades.

What is the debt ceiling?

The debt ceiling is the federal borrowing limit, currently set by Congress at about $16.7 trillion. The Treasury has been operating a hair under the limit since May 19 by juggling funds among different accounts. The gimmicks won’t last past Oct. 17, Treasury Secretary Jacob Lew told Congress last week. At that point, the Treasury won’t be able to issue new debt without violating the law.

 

 

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Source: WSJ

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  1. Wednesday, October 2nd, 2013 at 2:34 am

    How this crisis can (maybe) now work out in the GOP’s favour…

    Okay so all except the most one-eyed conservative has to admit the reality that the GOP will be blamed by voters for the budget / gov’t shut down crisis. But an interesting thing may very well happen on the way to next month’s circus.

    The debt ceiling D-Day is just around the corner. In fact it’s so close that it now seems VERY probable that the budget / shut down crisis will not be resolved by mid Oct and THEN an interesting thing may happen – the budget / shut down / Obama-care crisis and the debt ceiling crisis will combine into one ENORMOUS crisis that revolves around both issues.

    This could be VERY interesting. Mainly because just as the public supports the Dems on the budget / shut down issue, they broadly support the GOP on the debt ceiling issue. So if the two fights turn into one BIG fight, who will the public end up supporting?

    It could be a hail-mary / gift from God situation that saves the GOP.

    Boehner has made it clear that he wanted to avoid the shut down confrontation in order to save his ammo for the debt ceiling crisis. And he may kinda sorta get what he wants now. The conservative wing of the GOP (I think that may be me) may then get what they really want – the opportunity to force changes to the ACA set-up with the FULL BACKING of the US electorate. Because the political conversation / vicious trench war will be about balancing our national kitty, we can make changes to Obama-care by making the simple argument that the US simply can’t afford the ACA. Because it is a financial reality and not an ideologically based argument, independent voters are much more likely to respond to it.

    With a bit of luck our gleefully anticipated thumping at the polls in the mid-term elections will then remain a Democrat pipe-dream and the ACA will be amended as we’d like.

    Maybe.

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