Investors Concerned Aout US Debt Ceiling Crisis

    24 October, 2013


    From VOA Learning English, this is the Economics Report.

    There has been a lot of talk about the debt ceiling in the United States. The debt ceiling is a legal limit on the amount of money the federal government can borrow. Political disputes over that amount have concerned investors in recent weeks.

    Alexander Gelber is an assistant professor of public policy at the University of California in Berkeley. He says American lawmakers must negotiate a new debt ceiling everytime the federal debt reaches that legal limit.

    "The debt ceiling is a limit on the amount that US Treasury can borrow, and that limit needs to be raised by congress periodically."

    National debt is necessary when a government spends more money than it has available. Governments offer bonds and other investments to raise money to pay for the spending. In return, the government promises to repay investors who buy the securities.

    The financial demands of World War I led American lawmakers to establish a total debt limit. In 1917, congress agreed that the president could borrow up to a set amount without seeking congressional approval.

    Congress has agreed to change the debt limit 10 times since 2001. But the major parties have yet to agree on spending levels or on the need to borrow to pay for government operations.

    Other nations buy United States Treasury department securities because they are considered the safest investment in the world. The partial shutdown of the federal government led to worldwide concern about the safety of these investments.

    The debt ceiling was supposed to reach the legal limit last week. Without power to borrow more, the government would have been unable to pay investors who owned Treasury department securities.

    Professor Gelber says the possibility of the United States failing to pay its debts caused concern around the world.

    In recent years, disputes over spending and debt limits have led to delays in congressional approval of a budget and in raising the debt ceiling.

    Last week, only 1 day before borrowing reach the legal limit, congress agreed to re-open the government without enforcing the debt ceiling.

    Lawmakers agreed to let the president decide what the Treasury department could borrow through February 7th. Congress approved a budget to operate the government through January 15th.

    The president and congress must now negotiate a new spending plan and another debt limit in order to avoid another crisis.

    And that's the Economics Report from VOA Learning English, I'm Mario Ritter.