Economics: Why the Debt Ceiling has to be raised

While the proposed Legislation that’s now passed the Senate and is moving toward a House of Representatives vote this Friday is laden with unnecessary regulation and several points which usurp liberties, the fact is the debt ceiling needed to be raised if Americans are to continue to enjoy a decent standard of living.

On one hand, accosting new federal powers should be lauded. There was little formal debate on many of the new powers contained in the bill, many of which should have been raised separately, if a truly prudent Congress was in session. The focus of the ire of patriotic Americans ought to be on this aspect of the proposal squarely.

However, it is quite unsettling that many are accosting the Fed and the US Government for raising the debt ceiling. This was a prudent decision on behalf of the entities that will ensure many Americans do not experience a rapid decline in their individual standards of living.

Under our current, debt-based monetary system, everything depends on the borrowing of currency and the public trust in the value of it. All Federal Reserve Notes are borrowed, so much for anyone’s argument about passing debt on to future generations. Such has been occurring for almost a century. Suffice to say the Republican argument implying this current generation of Americans has some sort of unique calling or responsibility to not pass debt on to the next generation is one that rings hallow. Via the hidden debt of inflation and taxation on a level that would have been considered as grounds for contemptuous admonishment by the Founders, our currency has lost most of its purchasing power and plenty of value, especially in the last decade.

If the debt ceiling is raised, that will enable the Treasury to issue more bonds so that the Fed may place more money into circulation. More money in circulation allows for payment of debts owed to other countries, earmarking for infrastructure projects, and money for business investors to borrow. As overhead costs are taking up a large share of employer’s budgets, there is less money to provide workers with wages. In a market where rising costs are resulting in rising prices, the workers’ money is worth less as a result. If this were allowed to continue, the continued rising prices would leave Americans with less substantial incomes to be able to afford less utilities, goods and services…right down to the point where workers must choose between paying one essential bill or another.

Americans have passed debt on to future generations since the inception of the Federal Reserve System; this is no secret to anyone with a passing interest in Economics. Most “money” is not in the form of cash, not existing as actual bills, but as ledger entries and commercial paper. More debt exists than there is currency to pay off, even if the entire economy turned in its cash to settle the debt. If the debt that has been passed on to us from generations passed, the point is moot in having an opinion the debt ceiling should not be increased. The increase in the debt ceiling is required in order for the average American to economically survive.

For one to question that fact, they must have a rather dim perspective of the realities of our current economic system.