Saturday, December 31, 2005

U.S. Government "Debt Limit" to be Raised-Again

U.S. Treasury Secretary John Snow now urges Congress to raise the legal debt limit for the U.S. government-again. The debt limit is now set at $8,184 billion (This refers to the gross debt and includes bonds held by the Social Security Trust Fund and other government agencies). It was last raised as late as November 2004, with $800 billion to its current level and Snow warned that this level would be reached as soon as mid-February 2006.

I have 2 observations here:
1. What's the point of having a "debt limit" if it is raised whenever it is reached? None at all. The point of debt limits is to limit debts, but if it can and are raised whenever debts reaches that level than the situation is no different from what it would have been without a formal debt limit.

2. If debts increase by a full $800 billion in just a little over a year, then the fiscal position of the U.S. government is anything but sound, notwithstanding the absurd assertions from John Snow in other contexts.


Post a Comment

<< Home