In coming weeks, you will be hearing a lot about the debt ceiling from the big banks. Instead, learn something useful about real ceilings. Or maybe try to get to know Matt Damon. The interest rate will not increase, but it will still be time better spent than worrying about the debt ceiling.
Everything about the debt ceiling has been said for a month. If you want to, just hit the power button on your device and shut everything out!
You're not alone, you are a human being. There is a strange call to drama regarding the debt ceiling. Everybody knows how it will end, yet some people enjoy the show anyway, like an episode of Curb Your Enthusiasm where you know Larry is going to debase himself. That's what happens every time. In this case, Congress is going to debase himself, because that's what always happens. The federal government is in danger of defaulting on its ability to borrow money, which triggers a few months of fake drama about what might happen if Washington defaulted on some of its obligations every few years. If the U.S. government defaulted on debt payments, it would absolutely ruin global financial markets and cause not a recession, but a 1930's-style depression? That would be an entirely man made disaster with mobs coming for the politicians responsible. The politicians may be venal, but can't bear to shoulder the blame for mass starvation. So they always avert a disaster which was never going to happen anyway, such as stunt drivers in a video game.
The U.S. Treasury should be able to borrow as much money as it needs to pay for spending Congress had authorized himself. But it needs periodic approval from Congress when the total amount of borrowing goes up, as it has been for the last 20 years. This requirement dates to 1917 and may make sense if Congress had legitimate concerns about running up too much debt. You know where this is going: Nobody cares about debt, because it turns out modern finance allows governments to get free money with no penalty except that voters might get rowdy if they feel somebody else is getting more cash than they want.
Republicans passed free money when they gave the tax cuts to 2017 to citizens. President Trump and other Republican leaders talked about the miraculous'supply-side' growth that the tax cuts would trigger. There was no miracle, no notable growth spurt as researchers at Brookings Institution have demonstrated thoroughly. But the tax cuts in the US will add about $1.5 trillion to the national debt — money which is mostly transferred from future taxpayers to wealthy Americans today.
Biden and his fellow Democrats figure that if Republicans take on federal debt to hand out money to their favored constituents, well they should too. Biden wants to make permanent an advanceable child tax credit which puts bad money into middle- and working-class bank accounts. Biden has many other plans that would add between $1 trillion and $3 trillion to the National Debt. He claims much of his agenda would be made up but if Congress manages to pass it, watch for budget gimmicks that would lead to a lot more borrowing than Biden wants to admit.
$22.3 trillion. What if you include debt the government owes itself? Then it is $28.4 trillion. It is an unfathomable amount. Is America broken? Because it can always print tax income and raise money. Not all at once, but there's no possibility that the government would have to pay back all of it all with one exception. Those are the securities of 10 - year and 30-year guarantees, and so on. What should happen to me during the next three months? The Treasury Department will invoke 'extraordinary measures' to get the money needed to pay for everything until roughly early November, when the money will run out. Everybody who plays this game knows when is the real deadline of. Members of Congress and senior Biden Administration officials will make many stern statements about the importance of Congress extending the borrowing limit for a few more years. There will be scarier-sounding explanations about how Social Security checks won't go out and bridges will fall down and airplanes will crash if Congress doesn't extend the debt limit. The sky will be falling, theoretically.
The financial markets will take it all in stride because disaster has never struck before. 'This is one of the most intense issues at Washington, an irritant for the markets that gets resolved at the very last minute, says Greg Valliere, Chief US policy strategist at AGF Investments. 'The debt ceiling is always raised and it will be raised late in the fall. If financial markets really panicked about the possibility of the U.S. government defaulting on its debts, lawmakers would run to their respective chambers and pass the fastest debt-ceiling increase in history.
Why does the debt ceiling become unrealistic? At this point, yes. Why is there a price limit for runaway borrowing? The members of Congress should pass sensible, responsible legislation. Give it a chance.
Rick Newman is the author of four books, including Rebounders: How winners Pivot from Setback to Success