A Political Side to the National Debt

This is not a forum for political debates without getting the big picture. “Political” can mean many things, but here I mean it as related to government. Most articles I read about a position, by say a Democrat or Republican, are so narrowly defined in order to show their point. The “facts” are more noted for what is omitted than what it all entails, just to reach the conclusion of the writer.

But in discussing the National Debt, “politics” is unavoidable and some factors need to be addressed.

One thing I never knew is that Denmark is the only democratic nation other than the United States that has a debt ceiling and borrowing system separate from its spending policies. What does that mean?

By this process, spending bills like budgets are passed and then a separate battle is fought over whether the debt ceiling should be raised to accommodate borrowing to allow such spending. There is nothing to require a correlation between the two. However, in nations like Canada, Sweden, the United Kingdom, and New Zealand, spending is directly tied to the national debt limit. The government in Canada is allowed to borrow only as much money as is approved to be spent in the yearly budget. In the UK and New Zealand, the Treasury departments can borrow only as much as isapproved by parliament. These countries tie their debt limits to their spending numbers.   (Radio Free Europe article, August 26, 2014)

Where else is a borrowing system separated from spending? That is not something I learned in kindergarten.

This is a good example of where the facts end and “politics” starts. Shutting down the government because there is no budget since congress can not agree on a spending limit has nothing to do with economics anymore. “Unfortunately, the likelihood of the debt ceiling being abolished is very, very small,” Kirkegaards says. “Political parties very rarely sign away their own political leverage.”  It is all about political leverage and not about balancing budgets.

I will end this blog with a graph about when and how debt limits are set to give an idea of the size and frequency.

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