Debt Limit

The debt limit is a figure of money that the legislative body of the government authorizes to be borrowed in order to meet existing financial obligations. These obligations can include: military, social security, interest on the debt, Medicare, tax refunds, and other governmental expenses (United States Treasury, 2014).  When the government cannot pay for its existing financial obligations with its current authorized limit, Congress can be asked to raise it. An article from CNBC reports that the debt limit has been raised on various occasions in order to avoid a default on debt (Koba, 2013). To be specific, since 1960 it has been raised 78 times; 49 times under republicans holding office and 29 times under democrats (Koba, 2013). Yet, this was not always the case. Prior to the Second Liberty Bond Act of 1917, Congress had to authorize each individual item; but with WWI on the horizon the act was passed in order to better manage the war (Koba, 2013). The debt ceiling was thus created to allow the government to fund involvement with the war, but still have a cap that would be respected.

Watch: http://www.youtube.com/watch?v=KIbkoop4AYE

References:

Koba, M. (2013, October 8). Debt Ceiling: CNBC Explains. Retrieved from CNBC: www.cnbc.com/id/101047518

United States Treasury. (2014, March 29). Debt Limit. Retrieved from US Department of the Treasury: www. treasury.gov/initiatives/pages/debtlimit.aspx