For the past several months, we have heard more and more about “Going Off the Fiscal Cliff”. Most recently, it has been somewhat threatening, especially among Republicans in Congress who appear the be playing a Game of Chicken with President Barack Obama. The Senate has already passed the necessary Legislation. As it stands, if Congress doesn’t take specific steps to begin the process of Balancing the National Debt, the so-called “Bush Tax Cuts” would expire and across-the-board spending cuts would be implemented including to the (generally Sacred Cow) Department of Defense.
Most recently, Republicans have brought the “Debt Ceiling” into the discussion, perhaps trying to use that as a delaying tactic. You might recall that earlier this year, Republicans had threatened not to raise the Debt Ceiling, which would enable the US Government to Pay the Bills that have already been Appropriated and Spent. In effect, they had threatened to Close the Government–on several occasions. President Obama has already said that he’s not going to play that Negotiating Game in 2013.
Let’s take a moment to go over the ABCs of the US Debt. Generally, an individual, corporation or institution attempts to spread the maturities of various debts of a period of time, so as not to have a large amount of it’s debt coming due at any one time. Also, if you have a considerable amount of debt due at a time that interest rates have spiked, you wouldn’t be too happy.
The US Treasury divides its debt over three different vehicles: Treasury bills (T-bills) are issued for periods of one-year or less; T-notes are issued for periods from two-years to less than ten-years; and T-bonds are issued for ten years or more. Unlike T-bills and Notes, there is a limit (the Debt Ceiling) as to how much T-bond Debt can be outstanding. Don’t Ask!
To many people, the National Debt and the Debt Ceiling might sound like the same thing; but, they are not. For the most part, you can probably forget about this Post. However, if you wish to impress your fellow customers at the barber shop or hair salon, go ahead and WOM THEM!