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Debt Ceiling Crisis - What it Means for You

As the yahoos in Washington continue to play a very dangerous game of chicken, we’ve heard from many of you who have questions about what the debt ceiling crisis really means.

The debt ceiling is the maximum amount that the United States is authorized to borrow.

Raising the debt limit is nothing new.

The debt limit has been raised 78 times since 1917 when it was created.

In fact, you won’t hear any Republicans in Washington mention this, but Ronald Reagan raised it 17 times while in office.

That said, we don’t believe raising the debt ceiling should be taken lightly. 

We have to get away from the "same old - same old" in Washington that got us into this mess over the years.

The Democrats and Republicans, in the finest tradition of bi-partisanship, can't agree on anything let alone something as important as this! 

Even though we are buried with a $14 TRILLION plus national debt, they can't even come up with a compromise that would make raising the debt ceiling by August 2nd.

The Democrats don't want to touch Social Security and Medicare (votes!) and the Republicans don't want to raise taxes... so... here we are... no deal in sight!

Although Obama says that nothing is off the table regarding cuts and taxes, the process is currently frozen.

In our opinion, here's what's going to happen and how it will affect the average American.

First of all, the debt limit WILL be raised--maybe not by August 2nd, but it eventually will have to pass because America HAS to pay its bills.

Not paying our bills would mean the United States of America goes into default.  And those circumstances could be catastrophic in terms of costing us a fortune in terms of paying higher interest rates, and wreaking havoc for millions of Americans thanks to delayed payments on such things as veterans' benefits, Social Security and Medicare/Medicaid benefits.

Default would cause short-term chaos and long-term financial implications that would negatively impact all Americans and all American businesses (that could lead to the loss of even more American jobs).

So, WHEN it passes, how will it affect each of us?

By raising the debt ceiling, we're delaying the day of reckoning yet again.  It means not paying for our excessive spending today, but passing it along yet again to our children and grandchildren.

We need to worry about our kids' and grandkids' future.

Yes, raising the debt ceiling will prevent SHORT-TERM default, but ultimately federal spending MUST be brought under control or the dollar would, likely, lose its pre-eminent status as the world's reserve currency.

The bottom line is that despite the interminable bickering in DC, taxes MUST increase and spending MUST be cut to get our fiscal house in order.

That means less bucks in your pocket and severely limited services by federal, state and local governments that will affect all of our lives.

More taxes...less services.  That’s a fact you can bank on.

Bottom Line: Now more than ever, you must rely on yourself NOT the government. 

Make sure your finances are ready for this harsh new reality…

  1. Save, Save, Save.  Cut your expenses and tuck that money away for the rainy days ahead.
  2. Consider investing in gold—which is headed higher during the turmoil ahead.
  3. Make sure you have a solid nest egg that will be there for you if Social Security and Medicare are not.
  4. Do everything you can to protect your current job if you are lucky enough to have one.

As always, stay tuned to Dolans.com for money news that will help you survive and thrive during the challenging times we face.

Read More In: Credit Smarts Debt Management

Ken and Daria Dolan have hosted their own national radio program for 22 years, anchored their own television shows on CNN, authored six books on money matters, served as money contributors on CBS This Morning and have now launched a comprehensive web site and free e-letter at Dolans.com.


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Discussion:    Add a Comment | Comments 1-25 of 44 | Latest Comment | 1 2 Next »

July 8, 2011 12:57 PM

We don't have a revenue problem we have a SPENDING problem. Taxes revenue can increase without raising taxes. We just have to stop the pandering (for vote) politicians to live within budgetary constraints as we do.

View unverified member's comment - posted by TomCat

July 8, 2011 1:11 PM

Captblye69 - Couldn't agree more! Daria spelled out her thoughts on that here: http://www.dolans.com/blog/entry/73106/DEBT-WATERS-RISING-Will-Moody-s-Really...

July 8, 2011 2:59 PM

I am still waiting for someone to show me which section of the Constitution authorizes social security.

View unverified member's comment - posted by Bill V

July 8, 2011 3:37 PM updated: July 8, 2011 3:39 PM

Hi Dolans ... Love your work, but I need to take exception with your ascertation that not raising the celing means the United States of America goes into default. That is just not true. The U.S. has tremendous cash flow.

Every day billions flow into the coffers in tax revenue. By not raising the debt-ceiling, that will not cause default. Interest on the debt will always be the first priority and there is plenty of cash flow to do that.

What will happen is the other stuff ... the discretionary spending on everything from federal employees to funding of the arts and EVERYTHING else comes after servicing the debt. And that's what SHOULD happen. Cut the spending! Get rid of 10% of the federal employees for starters. Slash the foreign aid to countries who want to kill us.

Cut everything including the WH staff salaries (good God ... what a horrible example is being set there)

So I have to strongly disagree with your statement. It will not result in the U.S. defaulting on its debt obligations if the ceiling is not raised. I pray that it is not raised.

July 8, 2011 6:21 PM

Don't you think that by increasing the debt limit yet not increasing GDP that our lenders will catch on to this and stop lending to us? Sooner or later they're going to figure out that they're not going to get paid. I mean, if I owed $20,000 and kept asking for a higher and higher debt limit but never really made any progress on paying it down, would you lend to me?

View unverified member's comment - posted by legmanme

July 8, 2011 7:32 PM

That law/provision is right next to the part in the constitution where it is allowing income taxes.

July 8, 2011 7:35 PM

perhaps the Government should re-evaluate all the perks and services our elected officials get for free (we pay for them through our taxes) like full salary for the rest of their lives, full medical benefits (and they only get the best), not to mention expense accounts, transportation, lodging, etc. hmmmmm wonder how much money all this expense involves?Anybody who has a real job that offers all these things, please let me know where to apply.

July 8, 2011 7:44 PM

Don't you have to have a job to be able to retire.

July 8, 2011 9:29 PM

America At Work Do you remember the 1960's? America at work! American workers building america: Apollo, Minute Man, Deep space navagation and many other programs. american workers payning into their future. The American worker paying in to social security making it stronger.

Today we have exported the good paying jobs, and created welefare for America. The new american ethic is the check is in the mail, why work. Welefare has become our bigest employer. welefare comes in many forms but does not make payments in to our social security system, or other needed benfits. Ironically as pepole set idole nothing is paid into our future.

America needs something to do that is good paying. Work should be internal in America and contributing to benfits. Remember the saying: So goes General Motors so goes the world. Who will pay for our future cars? The people who have made good wages have been put on welfare of some kind.

July 9, 2011 9:15 AM

Oh what tangled webs we (congress) weave!

View unverified member's comment - posted by michellecm

July 9, 2011 10:57 AM

can't anyone start a movement to STOP sending aid to the rest of the world. we are not worlds babysitters. since our government is supposed to be "by the people, for the people, and of the people" why can't the american public vote on issues about sending aid and troops to the rest of the world. KEEP OUR MONEY HERE!!!!!!!!!!!!! we the american people should come first.

July 9, 2011 12:45 PM

This country is ripe for a revolt, and I think I will see it during my lifetime. Too much greed, secrecy,and double-dealing. We The People have had enough of it. Oh and Weiner? He resigned but will still get full pay. What a deal huh?

July 9, 2011 12:47 PM

Heard a joke recently.... what do you call a bunch of senators tied together at bottom of ocean? A good start.
Kinda sad state of affairs dont you think? Cannot wait to see who is going to run next election. Do not have a GOOD candidate in my mind to think of. Anyone have suggestions?

July 9, 2011 12:48 PM

Dolans? You see the dissent in here. Do you have any ideas how we Americans can fix the mess we are in?

July 9, 2011 5:23 PM

It doesn't matter who you send to the presidency. Politicians are in it for the money, fame, and power. They ALL make promises just to get elected and then never follow through.

July 9, 2011 7:11 PM

Although Americans in general are not happy with the idea of socialized medicine.... but with all the new restrictions and copayments and deductibles, who you can and cannot see, what procedures the administrative people at insurance companies (and not the doctors) decide are applicable to your medical situation...... kinda sounding like socialized medicine to me. pretty sneaky, huh?

July 9, 2011 7:12 PM

apologize for too many postings. this subject just has me so incensed.

July 10, 2011 1:09 PM

Start drug testing everyone or legalize it. If you're on welfare and fail the drug test no more welfare for you. Secure the border. If you can't speak English go home. Stop the anchor baby debacle. All government employees including elected and appointed, should have the same benefits as the average worker. Pay into social security and Medicare. Instead of retirement for life a 401-k plan and pay for your health insurance then, Medicare at age 65. Change the tax system to a flat tax for everyone.....

July 10, 2011 2:36 PM

likes the way Charlie thinks

July 10, 2011 8:03 PM

No, we do not need to raise taxes! Raising taxes or reducing deductions in a recession is nonsense! If taxes are raised or deductions reduced, those costs will be passed on to consumers by businesses or they will result in lower spending by the individuals being taxed. Government spending is the problem! It is now 25% of our economy. Government does not create prosperity. The private sector creates prosperity. Rather than reducing services, government entities should reduce their labor costs as such costs are generally about 60%+ of any entity. How come our President, Congress, governors, legislatures, and public employees are not willing to take pay cuts. I certainly have taken a severe pay cut. I am unemployed! Where is the shared sacrifice within government?

July 11, 2011 11:12 AM

LETS FACE REALITY.... THIS GOVERNMENT "NEVER" SOLVED THE INITIAL CAUSE OF THIS MESS... THE HOUSEING DEBACLE !! REALLY... ARE WE TO BELIEVE NAIVELY THAT THEY DID NOT KNOW WHAT THEY WERE DOING??? HA HA ... THEY NEVER INTENDED TO SOLVE THE HOUSEING MESS... THATS WHY FORCLOSURES THIS YEAR WILL BE THE HIGHEST SINCE THE BEGINNNING OF THIS !! ASK YOURSELF A QUESTION... IF YOU DON'T STOP THE BLEEDING YOU CAN NOT CURE THE DISEASE..
BOTTOM LINE... THIS IS A PLAN NOT ACCIDENTAL.. BANKRUPT THE COUNTRY.. WHO IS THE BENEFICIARY OF THIS MASS FAILURE?? FOLLOW THE MONEY AND WE WILL HAVE THE ANSWERS....
WE HAVE BEEN HAD --- THE SAD TRUTH..
PAUL P.

Discussion:    Add a Comment | Back to Top | Comments 1-25 of 44 | Latest Comment | 1 2 Next »

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