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Debt is a word I’m sure most Americans are well aware of. Whether it’s personal debt or the country’s national debt, it’s something that can’t be avoided. America’s debt is rising so fast that we are currently looking at our debt ceiling cracking. While there is no actual ceiling, these cracks are very real and a danger to the stability of our nation.

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The debt ceiling is a cap on the amount of debt the federal government can legally borrow set by Congress. Imagine if you stopped paying your credit cards bills or your car payments; you would ruin your credit rating and your car would be repossessed. The same thing happens with countries that default on their debt. Put simply, if Congress does not raise the debt ceiling then China, Japan, OPEC, and others will stop giving us low-interest loans. Foreigners will pull money out of the U.S. and the dollar will drop. In the end, this means that our cost of living will rise substantially.

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The debt ceiling was first set in 1917 at $11.5 billion. It has been raised 74 times since March 1962 and is currently set at $14.294 trillion. As of May 6, the debt totaled $14.271 trillion; only $23 billion away from hitting the cap. There has been a lot of debate on how we can make sure we don’t reach the debt ceiling and we don’t default on our loans.

It is important to note that Congress has never voted against increasing the limit on the debt ceiling and they will most likely do this again. However, the issues at stake go beyond just raising the ceiling and include reforming the budget and cutting spending.

Here is what The GOP says:

For the 2012 fiscal year would eventually cut federal deficits by about $4.4 trillion over the next decade. They would do this by making major changes to Medicare and Medicaid in which the government wouldn’t directly pay senior citizens’ bills. Instead, recipients would choose a plan from a list of private providers, which the federal government would subsidize. Medicaid, which provides health care for the disabled and the poor, would be transformed into a series of block grants to the states.

Here is what President Obama says:

Cut $4 trillion over the next decade without considerably changing any of the major entitlements, including Medicare and Medicaid. Among other things, he has also called for the creation of a “debt fail-safe” trigger that would impose automatic across-the-board spending cuts and tax changes in coming years if annual deficits are on track to exceed 2.8% of the nation’s gross domestic product. The President  also wants to repeal the Bush-era tax cuts on families making more than $250,000, which is strongly opposed by Republicans.

Hope this makes it a little clearer.