By Zachary Gross ’14, News Editor

In Part Two of the For Dummies Series, The Minuteman explains the basics of the debt ceiling and its relevance to current political discourse.

What is the debt ceiling?

According to the United States Treasury Department, the debt ceiling is the total amount of money the country is authorized to borrow to meet its existing legal obligations. In other words, it is the largest amount of money the country can borrow to pay for what it has already promised  to pay for, be it military salaries, Social Security payments, or anything else the government is on the hook for. Before the most recent agreement to raise the debt ceiling, it was a staggering $16.999 trillion.

What would happen if the United States broke through the debt ceiling?

It is difficult to say what precisely would happen if the debt ceiling were broken. However, a few things are for certain. Financial markets would undoubtedly fall significantly. The government would cease making payments on its everyday functions, with payouts to everyone from Social Security beneficiaries to government contractors immediately stopping. Just as importantly, it would be a lot more expensive for the United States to borrow money as investors would demand higher interest rates, fearing default.

Why did we recently come so close to breaking through the debt ceiling?

Many people see the possible consequences of a debt ceiling breach and wonder why in the world lawmakers could only come to an agreement to raise it the day before a possible breach. The rationale for some, especially for some Republicans, is that negotiating on whether or not to raise the debt ceiling provides important leverage for a larger goal: cutting government debt by reducing spending. The Young Republicans Club advisor Mr. Bitler said, “I don’t think that the debt ceiling should’ve been raised. I think we should have cut expenses in order to prevent default. The country is flat broke. It is in super amounts of debt which will be very difficult to pay off because the interest expense is growing.”

However, according to an NBC News poll conducted in October, 63% of Americans believe that the government should have raised the debt ceiling without debate. As Young Democrats co-president Eric Schwed ’14 put it, “Failing to raise the debt ceiling would’ve been disastrous. It would have had catastrophic ramifications for the economy. The resulting downgrade in our credit rating would have limited the government’s ability to borrow money in the future and seriously damaged our economic standing. Regardless of one’s position on the government’s ever increasing debt, it is misguided to believe that failing to raise the debt ceiling wouldn’t have had disastrous ramifications for the US economy.”

How did we avoid breaching the debt ceiling?

Initially, House Republicans demanded that an increase of the debt ceiling would have to be tied to defunding Obamacare. However, when it became clear that the president was unwilling to demolish his signature legislative achievement, Republicans insisted on general spending cuts instead. Eventually, both parties came together to reach a deal. On October 16, both houses of Congress passed a resolution to continue funding the government until January 15^th and raise the debt ceiling until February 7^th. In exchange for bringing the government back to work and raising the debt ceiling, the bill also, according to Yahoo! News, strengthened income verification requirements for those who sign up for Obamacare and called for both parties to appoint lawmakers to a panel to reach a broad budget resolution.

What’s next?

Republican Representative Paul Ryan and Democratic Senator Patty Murray will lead a budget round of negotiations. The two lawmakers will announce their results on December 13^th. In terms of immediate political fallout, both parties have sunk to new lows in polling. In a Washington Post-ABC News poll conducted after the agreement was reached, 49% disapproved of Congressional Democrats, a record high, and 63% disapproved of Congressional Republicans. President Obama’s approval rating, meanwhile, held steady around 50%. Economically, the stock market rallied on news of an agreement, with the S&P hitting a record high. Overall, however, there appears to be no end in sight to this long-term disagreement about the budget, with more political battles on the horizon and more debt piling up.

What does this mean for the Newark Academy community?

In short, not much, for now. Had the debt ceiling been breached, the economic shockwaves that could have erupted would have assuredly hit the pocketbooks of all Americans, with Newark Academy being no exception. Since a deal was reached, however, the community and the country made it through the crisis. In the longterm, though, it still means that Newark Academy students and faculty have to live in a world where fiscal disagreements lead to government crises every few months, until an election decisively gives either a bicameral mandate.