Hitting the Ceiling

Q Every few years you hear about the debt ceiling. Why is it so bad if it’s not raised? — W.W., Columbus, Ohio

A The debt ceiling is a limit, imposed by Congress, on how much outstanding debt our nation can have.

The United States government takes in revenue from taxes and other sources (but mostly taxes); it then uses this money to pay bills and fund the country’s operations, paying for things such as the military, Medicare, Social Security, transportation, job training, scientific research, infrastructure upkeep and much more. When there’s a shortfall, the government can borrow money — such as by issuing bonds, bills and notes.

If the limit is not raised, then the U.S. might default on some of its financial obligations. Many experts believe that a default would be a global catastrophe, damaging America’s economy and reputation, and potentially resulting in a recession.

***

Q How should I invest money I’m saving for a down payment on a home? — V.H., Huntsville, Alabama A It depends on when you expect to buy your home. Over long periods, it’s hard to beat the stock market for increasing the value of your portfolio. The stock market can be volatile, though, so it’s best to not invest in it with dollars you expect to need within, say, five years — or even 10 years, to be more conservative. You don’t want to have to withdraw your down payment right after the stock market has temporarily dropped.

If your expected home purchase will happen in the next few years, invest that down payment in safer places, such as certificates of deposit (CDs), money market accounts or shortterm bonds. You can find great interest rates at our sister site,