Q&A: What is the US debt ceiling?

 

Dollar bills A US default would undermine confidence in the dollar

The debt ceiling is a cap on the total amount the US government can borrow, set by US lawmakers.

The current debt limit of $16.699 trillion was reached in May. Since then the US Treasury has been using what are called extraordinary measures to keep paying the bills,according to BBC.

Why does the US government need to borrow so much?

If you compare borrowing to the size of the US economy, it has been increasing since the 1980s.

But the 2007 financial crisis created huge gaps between government income and expenditure.

The economy was plunged into a deep recession and federal finances deteriorated dramatically as the government attempted to boost the economy and stabilize the financial sector.

As a result the debt ceiling was raised twice in the second half of 2008 and twice in 2009.

According to the Congressional Budget Office (CBO), US debt as a percentage of gross domestic product (GDP) is now 73%, twice as much as it was at the end of 2007.

Why can't the president raise the limit?

He doesn't have that power.

The limits are set by lawmakers in Congress, which is made up of two houses, the Senate and the House of Representatives.

They set in law how much the Treasury department can borrow.

How often has the limit been raised?

Since March 1962, Congress has enacted 77 separate measures that have altered the limit on federal debt.

Until recently those changes have been achieved without a lot of fuss.

Why has it become such a big issue?

Since the Democrats lost control of the House of Representatives to the Republicans in 2010, budget fighting between the two parties has become commonplace.

 

Republicans took their victory in the mid-term elections as a sign that Americans had rejected the president's Democratic agenda, and more specifically, that Americans were unhappy with the Patient Protection and Affordable Care Act, or "Obamacare" as Republicans label it.

Although past budget fights have included larger questions about the size and scope of the US government, this one is very specifically about Mr Obama's healthcare law, substantial parts of which took effect on 1 October.

Republicans have been doing everything in their power to force Mr Obama to delay implementation of a law they strongly believe was rejected by the American public.

Democrats argue the law was validated by the Supreme Court in June 2012 and was a central issue in the 2012 presidential election, which Mr Obama won decisively.

It seems a messy way to run the nation's finances.

Part of the problem is that Congress approves spending separately from the debt ceiling.

So politicians can agree to all sorts of expenditure without necessarily having the financing in place to pay for it.

In good years that does not matter too much as government income is greater that expenditure.

But historically those have been rare.

Usually the Treasury has to cover the gap between income and expenditure, by borrowing on the international money markets.

When does the money run out?

The government has been juggling its debts to keep paying the bills, but those measures will run out between 22 October and the end of the month, according to the Congressional Budget Office.

What happens then?

The government could make drastic cuts in federal spending or try to raise taxes, or possibly even both.

That would be difficult and, perhaps, not enough.

During the previous row over the debt ceiling in 2011, then Treasury Secretary Tim Geithner warned that the US government's obligations are so great "immediate cuts in spending or tax increases cannot make the necessary cash available".

So what does that mean?

The big worry is that the US government may have to stop paying back its debts, which is known as a default.

 

Traditionally the US has been able to borrow at low interest rates on the international markets, which has helped keep interest rates low for consumers.

But a default could damage confidence and drive up the cost of borrowing for Americans.

A default could also create a chaotic situation on the international market for debt.

Investors would not want to accept bonds that were no longer being honoured.

But the market is not set up to deal with rejected bonds, so there could be a period of confusion for traders.

What would it mean for the rest of the world?

A default would send a shock through the financial markets.

US bonds, known as treasuries, have always been seen as a safe investment and trillions of dollars are invested in them.

Analysts say it is hard to know what would happen and a lot would depend on how long the default lasts.

Investors may be prepared to wait out a short disruption.

But a lengthy default might see money switch into other perceived havens, such as German and Swiss debt.

There might also be a rush into gold, which is traditionally seen as a safe investment.

Are there any other options?

The president could ignore the debt ceiling.

He would be breaking the law and could be impeached.

But if the alternative is to cut funding for doctors, schools and agencies such as the FBI, he might decide it is the least bad option.

M.D

National Strategy to Develop Small, Medium-Sized Enterprises

DAMASCUS, (ST)- Ministry of Industry recently revealed that the Syrian Business and Enterprises Center (SBEC) has re-formulated the national strategy for the development of small and medium-sized enterprises in order to fully fit with the requirements of the stage and the challenges that have arisen about in the light of the Cabinet's directions.

The ministry showed that the objectives of the strategy focused on uniting the efforts of the parties concerned within the framework of a unified work and developing the Syrians' vision towards private enterprises and ensure data on small and medium enterprises. 

The strategy assumed creation of the national commission for small and medium-sized enterprises as an essential step to be carried out so to coordinate and implement the strategic orientations of the proposed projects between all government agencies concerned.

The ministry has proposed the adoption of a strategy of small and medium enterprises to provide the initial ground work to improve the private business in the sector of small and medium-sized enterprises. The ministry  called for waiting to create  the small and medium-sized enterprises' board, upon providing an integrated vision on the mechanism of creation the board and its functioning.

Regarding the financing by the Central Bank of Syria for small and medium enterprises, the study included the importance of the small and medium enterprises and a description of the reality of the moment in Syria and its ability to obtain the necessary funding for the exercise of their activities and procedures of the Central Bank of Syria to support this sector with revenues and a set of proposals to support and revitalize the work of small and medium enterprises.

The study examined the integration of small and medium enterprises and micro enterprises at the same time and this subject is not just economically. The process of dealing with micro-enterprises are quite different from the mechanism to deal with small and medium-sized enterprises from the state policy towards business strategy.

With regard to the proposal of funding for small and medium enterprises, the ministry showed that the central bank introduced an appropriate proposal for the funding process, but the proposal did not accompanied by a study of the expected impact to approve the funding mechanism.

It is necessary to prepare a study to evaluate  the impact according to two models, the second takes into account lower interest rates with the separation of interest rates between micro projects, small and medium-sized enterprises as well as to develop a proposal for an Islamic financing mechanism for these projects in order to reach the largest possible number of customers.

Concerning the future proposals, the ministry suggested the adoption of a strategy of small and medium enterprises to be the core vision for the development of the legislative and regular framework to convert these projects to a private joint-stock or normal companies.

Sharif al -Khatib

Mapping Out a Vision to Promote National Economy, Living Conditions

DAMASCUS, (ST) - Members of the Economic Committee of the Comprehensive National Dialogue Forum recently discussed with a number of economists means of developing  a vision that includes the main axes that could promote the national economy and the living conditions of the citizens.

Members of the Economic Committee underlined the importance of focusing on the total economic indicators that reflect the economic situation and the performance of the economic sectors in the country in general as unemployment rates, incomes and inflation, which negatively affect the producer and the consumer. They pointed out the importance of strengthening economic participatory pluralism and rehabilitation of public sector, particularly strategic ones according to a specific plan and to provide the necessary capabilities through scientific studies.

The members noted the need to reconsider the functions of the Ministry of Internal Trade and Consumer Protection through the development of control mechanisms of the markets, and enhancing  the role of institutions to intervene positively, activating the role of civil society in this area, showing the  importance of activating the system of support provided to citizens and groups most in need through the adoption of development programs and providing the necessary facilities to launch medium and small projects and micro enterprises being the main carrier of the national economy in addition to a focus on handmade crafts and the mechanisms of its protection.

They also called to encourage investments in developing regions, especially in the agricultural field and facilitate administrative procedures relating to the subject of the license and the creation of infrastructure to ensure attracting investment to this sector as a priority along with other sectors including renewable and alternative energy.  The members noted the need to reorganize the slums within banking and financial facilities, focus on the housing projects of various kinds, especially the real estate sector includes about 160 profession can be used to absorb the labor force in the market, especially in the reconstruction phase.

The conferees stressed the compulsory education and to be free of charge at all stages and improve its quality and output so that it complies with the requirements of economic development and improve the efficiency of the health sector.

Sharif  Al -Khatib

Syria, Russia Talk on Boosting Trade Exchange

 MOSCOW- Syrian and Russia have discussed ways of enhancing economic, trade, agricultural and industrial cooperation.

The talks held on Friday by the Syrian economic delegation led by Deputy Minister of Economy and Foreign Trade Hayyan Suleiman with a Russian delegation representing Moscow Chamber of Industry and Commerce, also focused on the issue of Syria's joining of the Custom Federation between Russia, Belarus and Kazakhstan and the BRICS Grouping which comprises Brazil, Russia, India, China and South Africa.

The Syrian side affirms the government's policy of directing Syria's trade and economic relations eastward, particularly towards the Russian markets where many Syrian products can be promoted.

The Syrian delegation, who urged the Russian companies to work and carry out investments in Syria, stressed the importance of opening a credit in the Russian banks so as to facilitate payments by the businessmen of both sides and to expand trade exchange.

The delegation pointed out that Syria needs to attract Russian investments in the areas of reconstruction and economic development.

For his part, Chief of the International and Regional Cooperation at the Moscow Chamber of Commerce and Industry Youri Morozov, said the requests of the Syrian partners will receive every support by the chamber and by the governor of Moscow, wishing Syria and the Syrian people prosperity and peace.

In a statement to SANA correspondent in Moscow, Dr. Suleiman hailed the talks as positive and said that besides discussing economic and trade relations, the two sides exchanged view points on the political situation particularly under the global conspiracy to which Syria is being exposed. 

Morozov also told SANA that the "Russian people feel sorry for the Syrians' crisis-caused suffering. We hope that the crisis will end peacefully as soon as possible, because the use of force can achieve nothing."

Describing the talks as successful, Morozov stressed that the Moscow Chamber of Industry and Commerce will spare no effort to implement all the points discussed and agreed on during the Syrian delegation's visit.

"Very soon, we can say that economic and trade cooperation between the two countries has made long strides," Morozov said, welcoming Syria's desire to join organizations like the BRICS, the Shanghai for Cooperation and other economic groups.

H. Mustafa         

DSE Scores Notable Increase

DAMASCUS, (ST)--Damascus Securities Exchange (DSE) indicator increased on Tuesday to reach more than 1234 points, according to bank sources.

The sources said that banks' reserves of foreign currency and its financial data continue to attract investors to the Damascus Securities Exchange, stressing that the process of purchasing shares witnesses a notable turnout.

According to the sources, economic experts expect that the DSE indicator will continue its increase as a huge amount of money goes to investment in the securities market.

H. Mustafa