Marc teaches Jay about the debt ceiling

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This is an email exchange between Marc and Jay regarding the United States debt ceiling.  Yes, we do have actual conversations that aren’t about nonsense like farting on subways.  Can you guess which one reads journals and which one reads x-men comics in his spare time?

Jay:  Obama said raising the debt ceiling does not raise the actual debt.  Now I don’t have my MBA yet but I’m pretty sure making the number of dollars owed higher means you owe more money.

Marc: Yep, you don’t have an MBA. All the debt ceiling means is the amount we are allowed to borrow. We need to borrow more money because we owe more money than we have. The budget and the debt ceiling are separate things. In simplest terms, our budget is set for us to pay $100 this year but we only have $80 on hand. We want to borrow $20 so we can pay the full $100 that we owe and the republicans are saying they won’t let us borrow that last $20. Except in this case, instead of $20 we owe $17 trillion and we need to borrow more because our bills are higher than what we are taking in. Essentially in accounting terms, our debts are higher than our credits on our balance sheet so we need to borrow money to make up that shortfall and the republicans are against it. It is not the best idea to have to keep borrowing more money but that should be worked out when you make the budget and not when the bill comes.

The positive side is that the market is willing to loan the US Gov money at such a small interest rate that it makes no sense not to borrow especially since the alternative is the crashing of our economy. It would be like you not having the money for rent and the bank saying we will loan you the rent money at 1% interest and you saying i would prefer to be evicted.

Jay: Right but it’s not like if we raise the amount we can borrow we aren’t going to use it.  I know technically raising the limit doesn’t increase the debt but the debt will be increased by that amount in a pretty short amount of time right?

Marc:  Right, you are buying into the Republicans argument. Yes, of course we are raising the debt limit because we need to increase our borrowing and raise our debt. But, we already owe the money. If we don’t raise the debt limit than we have to sell the people owed interest on our current debt, everyone who works for the country including our soldiers and Medicare, Social Security and Medicaid recipients that we no longer have enough money to pay everyone. If we start falling short on our bills, people will stop wanting borrow money from us or charge us higher rates for borrowing which means it will be even more expensive for us to pay off our debt. And, how is say China going feel when we way hey, I know we owe you trillions but we are no longer gong to pay you? The best way to really reduce our debt would be to raise more revenue and the best way to raise more revenue is to reduce unemployment. If more people had jobs than more people would be paying taxes and we would be fine. Instead, unemployment is still insanely high and no one seems to give a shit. We are taking in less money in taxes and trying to offset it by cutting government spending which just takes money out of the economy and costs us jobs. It is a terrible cycle that is killing Europe right now. 

Bc Europe is cutting spending at a much worse rate than we are.

Jay: I guess my problem is that we spend 60% of our entire budget on military spending and then say we don’t have enough money.

Marc: Right, we already said we would pay for all these bombs to be made. Now we actually have to pay for the bombs. You sound very unAmerican when you insinuate that there is a problem with spending a trillion dollars to kill brown people overseas.