Americans frequently hear that our economy is imperiled when the U.S. government debt approaches its legal borrowing limit. Yet it’s the debt itself—not the debt limit—which is the real, long-term threat to the economy.
Women typically oversee their household’s day-to-day finances. They understand that if a family habitually spends more than it takes in, the real problem isn’t that they have hit their credit card borrowing limit. The real problem is that they are spending more than they can afford and need to reassess their lifestyle or risk bankruptcy.
The United States faces a similar dilemma. Currently, our official national debt is $16.7 trillion. That’s around $53,000 for every citizen. Even this eye-popping sum understates the real unfunded liabilities of our nation because it ignores the promises made, but not financed, by our nation’s entitlement programs, including Social Security and Medicare.
Congress is supposed to protect the public’s interest by preventing ruinous debt accumulation, which is why there is a limit on how much debt the Administration can issue. Hitting the debt ceiling is a problem, though the government can prioritize the most critical obligations (such as interest payments) to minimize damage and disruption. Ultimately, Congress and the Administration should come to an agreement to raise the debt limit to avoid such crises, but more fundamentally, policy leaders need to develop a plan for bringing spending in line with revenue and to reduce our national debt.