News: The Debt Ceiling rises to accommodate discretionary spending
As of Monday, Aug. 1, 2011, the House of Representatives approved a compromised deal between the White House and congressional leaders to raise the debt ceiling which passed with the support of 95 Democrats and 175 Republicans. This compromise will allow debt to increase to as much as $2.4 trillion. With this influx of money, the average American can purchase 1,600,000 purple Ferraris or 81,939,228 Nissan Muranos for a standard family of four.
A further amount of $1.2 trillion and $1.5 trillion will be available upon special committee approval.
Discretionary spending in the coming years will be cut significantly by $21 billion in 2012 and $42 billion in 2013 according to the Congressional Budget Office. This deal also affects student loan programs and Pell Grants. Low-income college students will receive Pell Grants with an increased $17 billion taken from the subsidized loans of graduate students.
Crystal Dukepoo, an undecided major, feels that community colleges will be exempt from the loss of programs. “(Programs cuts) may be a problem for universities … because they cost a lot more, but not for like community colleges,” she said.
Dukepoo also feels that small events throughout history led up to the downturn of the economy.
“It’s one of those things that we have to do if we’re going to continue to operate the federal government the way we have been,” Scott Gustafson, economics instructor, commented on the recent raise of the debt ceiling. “If you hadn’t raised the debt ceiling, you would have immediately had to balance the budgets starting from that day going forward and the way the federal government is spending money. 40 percent of what they’re spending is borrowed money.”
The Second Liberty Bond Act was the first document to establish the beginning of debt ceiling history in 1917 which helped to finance World War I. September 1981 marked the first month of the debt ceiling to be increased by the trillions and has gone up little by little ever since.
“Of course our nation is always going to be in debt, it’s just practical,” Alex Larson, secondary education major, said. “We’re not self-sustaining because we have so many relationships with other countries and stuff. I think that it’s a huge priority that we need to get figured out rather than a lot of stuff that we are doing.”
Many programs have been cut in order to raise the debt ceiling to such a high number, including the NASA program, a decision Larson agrees with. “It’s not frivolous in any way you know, it’s important science, but I think that … things need to be taken care of that are more prevalent,” he said.
This new debt deal could hurt students looking to advance their degrees with the government eliminating subsidies, however the Pell Grant programs will be preserved with the savings.
“(The federal government) had to (raise the debt ceiling) a lot sooner and a lot bigger then they have in the past because the debt is running so high … in the last three years it has changed very, very dramatically,” Gustafson said.
In order for the United States to rectify the recent downturn of the economy, Gustafson said they are three ways of gaining financial stability.
“You can try to do it by reducing expenditures, you can do it by increasing income or the third way you can do it is by inflating the currency and none of those is good,” he said. “If you go back about the last 25 years or maybe even more than that, on the average for the federal government, what we have managed to raise in terms of revenue has averaged around 19 percent of GDP (Gross Domestic Product) and we have had multiple tax schemes over that period of time.”
In comparison to another well-known economic tribulation in history, the Great Depression of the 1930s, Gustafson believes the U.S. is better off now than in past years. “The unemployment rate during the Great Depression … we were talking 25 percent unemployment rate. We maxed out at just over 10 percent and we’re currently running at 9 percent (unemployment rate).
“This is not a Great Depression, but it is a fairly substantial recession,” Gustafson stated. He also believes that the recession has been over since mid-2009, but America is still feeling the effects because GDP has not increased fast enough to create more jobs for the public.