Understanding why we CANNOT raise the debt limit.

Currently, the debt limit is $14.2 trillion for a population that was 307 million people in 2009.  That’s about $46254 per person in the United States.  Now, this isn’t like a mortgage, this is like a credit card.  It is unsecured debt.  That’s like saying that each person in the US has a credit card with a limit of $46,254 dollars on it, that you gave to your crazy uncle (Sammy).  Now Sammy is coming to you and asking you to increase the limit on “your” credit card.

Does that sound crazy?  Try this for size, a large number of people in the US don’t make that much per year.  Most kids are doing well if they get $1000 in allowance and presents.  A teenager who manages to get a part-time job at McDonald’s might make as much as $7.25*30 hours*52 weeks = $11,310.  If you were a bank, would you give those kids a LARGER credit limit?  Heck, if I were a bank, I wouldn’t give MYSELF more than $1000-$2000 of unsecured debt.

So, how should we rationalize this?  Well, the 2009 GDP was $14.12 trillion, so that would mean every person has an unsecured credit limit equal to their annual income.  So, every child deserves a credit card equivalent to their allowance?  Oh, and this isn’t a credit card with a 0 balance, this is a MAXED OUT credit card.  So, if you feel like the “rich” should take on more of the debt, you’re still in hock at the rate of your annual gross income.  That’s in addition to any credit cards you may already have.

So, how would you react to a tight budget when you don’t have enough income to cover your bills?  I would start finding things to cut.  I can get rid of my internet access and use the library’s.  I can live without cable.  I will even eat out less and cook more.  Ultimately, some people even accept that they can’t afford their own home, and move into a smaller, and cheaper, apartment.  In other words, most people do NOT go to their credit card banks and ask for a higher limit.  They figure out how to live in their means.

The government is no different.  It has to live within its means.  Raising the debt limit is not doing that.  Now, does it suck to give up things you really like, such as cable and cell phones?  Of course it does.  Does it suck to not eat out as much?  Of course.  So will it suck for the government to stop providing certain services?  Of course it will.  On the other hand, if the government stops providing certain services, it will result in private enterprise having the chance to provide those services instead.  That might help reduce unemployment!  Sounds like a win-win to me.

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