Financial Fitness with Alan Akina - Debt Ceiling

2 Aug 2011 · 2 min

Watch on YouTube

1:31

In this short financial fitness segment, Alan Akina explains the U.S. debt ceiling in plain language. He likens the debt ceiling to a personal credit‑card limit, noting that the federal government has been spending beyond its revenue and must borrow to meet obligations. He describes the imminent “run‑out” date when the government would hit its borrowing limit, and outlines the two policy choices facing Congress: raise the limit (which would increase debt and future costs) or refuse to raise it (which could halt payments to federal programs, military personnel, and Social Security). Akina also warns that a failure to pay would damage the nation’s credit rating, potentially raising interest rates and affecting the cost of goods for everyday Americans. The segment ends with a sign‑off for the “Wake Up Today” program.

Well, it is Monday, and that means it's time for another financial fitness segment.
Alan Akina talks about the debt limit.
Good morning, everyone. People are asking me the question, what is the debt ceiling? It's in the news every day, and we're just getting freaked out about it. Now, I'll try to explain it to you as simply as I possibly can to help you understand it better and so you know what's at stake. So the debt ceiling is like the credit limit on our credit cards. But this is for the national debt limit enacted by Congress. Since the government has been breaking the golden rule of personal finance, which is to never spend more than you make, we have to keep borrowing to pay the bills. Tomorrow, Tuesday, is when the federal government predicts we will run out of money. That really means we have borrowed up to our credit limit and therefore might not be able to pay all of our bills. So the big debate in Congress is Should we allow a credit limit increase or not? If Congress agreed to an increase, then we'll get deeper in debt and it'll cost us more over time. Now, if Congress refuses to approve the increase, we will not have the money to pay for some of the federal programs, military pay, and possibly Social Security. And just like you and I would get a ding on our credit score for not making the payment, the government's credit rating will take a major hit. And this could possibly have an effect on all of our interest rates, cost of goods, and more. For Wake Up Today, I'm Alan Akina. See you next time.
Thank you, Alan.