Late last night, President Barack Obama and leaders of Congress reached an important agreement. After many setbacks, they have come to a compromise on how the U.S. government should handle its debt crisis. Currently, the government is spending and borrowing more money than it is bringing in. If it goes too far into debt, the U.S. government would be unable to pay its bills and runs the risk of shutting down. A last-minute deal was made to prevent this from happening. "We have averted an economic crisis," said Senator Dick Durbin of Illinois, the Senate's second-ranked Democrat.
Hitting the Ceiling
The debt crisis occurred because of an imbalance between the amount of money taken in and the amount given out. To maintain a monetary balance, the government creates a budget. A budget is a set amount of money that the government is allowed to spend on various programs, ranging from national park preservation to health care. When the budget runs out, the government borrows money from state and local governments, as well as from private institutions and international governments. This results in debt. Congress places a strict legal limit on the amount of money that can be borrowed each year. This is called a debt ceiling.
In May, the United States hit its debt ceiling of $14.3 trillion. If Congress does not vote to raise the debt ceiling by August 2, the borrowed money will not be available for the government to make its promised payments. The United States plays a large role in the global economy. Exceeding the debt ceiling would not only hurt our government, it would also affect the rest of the world.
Making a Compromise
On Sunday night, lawmakers agreed to a deal to increase the debt ceiling by about $2 trillion by making spending cuts over the next ten years. While the compromise has been made, both the Senate and the House of Representatives must officially pass the proposal.
Both Democrats and Republicans are expressing various opinions of opposition and support to the debt-ceiling increase. While there are mixed reactions to the deal, there is also relief. "It is always dangerous to crawl out on a limb and make a prediction about how the vote will go on something as controversial as this," said Republican Senator Mike Crapo of Idaho. "But I believe in the end we will see pretty strong support on both sides."