Sometime in mid-October the U.S. will reach its debt ceiling. When this happens, Congress will need to increase the debt ceiling, or the U.S. will not be able to raise additional funds which are needed to pay for services the government has already authorized. Over the last 20-30 years raising the debt ceiling has become very political as one party (Democrats or Republicans) uses the raising of the debt ceiling as a political hammer to make the other party look bad. It is usually the minority party that tries to make the majority party look bad. Currently the Republican minority is threatening to block the increase of the debt ceiling to make the Democrats look like they are fiscally irresponsible. During Trump’s term, the debt ceiling was raised or waived three times while the Democrats complained that Trump had to increase the debt because of his perceived fiscally irresponsible reductions in the corporate tax rates that benefitted the rich.
Here is how the national debt has increased by president since 1980:
Current debt: $28.4 trillion
Increase by president
Trump $6.7
Obama $8.6
Bush $5.8
Clinton $1.4
Bush $1.6
Reagan $1.9
Total $26.0 Trillion
Republican Presidents $16.0 trillion and Democrat Presidents $10.0
The truth of the matter is the debt is a national problem not a political problem. Voting to raise the debt limit doesn’t authorize new spending. It essentially allows the Treasury to raise money to pay for expenses the government has already authorized. About one-third of federal spending is discretionary, which Congress approves through annual appropriations bills. The rest is automatic spending on programs such as Medicare, Medicaid and Social Security.
What would happen if the debt limit isn’t raised? Per the Wall Street Journal, if the government can’t borrow to pay bills that come due, it would have to suspend certain pension payments, withhold or cut the pay of soldiers and federal workers, or delay interest payments, which would constitute default. Unless Congress raises the debt ceiling, the Treasury could be forced to cut payments by more than 40%, including to some U.S. households, according to one estimate from Goldman Goldman Sachs.
In 2011, Standard & Poor’s stripped the U.S. of its triple-A credit rating for the first time after the Treasury came within days of being unable to pay certain benefits. Business groups, current and former Treasury officials and Wall Street firms have raised alarms in recent weeks over the prospect of a government default, which they say would be disastrous for financial markets and the U.S. economy.
Don’t be confused by the political rhetoric. Raising the debt ceiling will not prevent the deficit from increasing, but not raising it will have devastating impact on the economy. If Congress could ever live within their means, we would not need to raise the debt ceiling again. The problem is that for the last 70 years Congress has not figured how to live within their means regardless of which party was in control.
Stay safe. Wash your hands regularly. Schedule your vaccine and booster. Wear your mask. Social distance.
Orchid of the Day: Dr. John Duncan for not breaking any windows today during our round of golf at the Heather golf course. See quote below.
Onion of the Day: The U.S. Congress. See above.
Quote of the Day: “At least we didn’t break any windows today.” Lorenzo Baker to his good friend Dr. John Duncan, on the 17th tee of the Heather golf course after we all teed off. A few years back Dr. Duncan pull hooked his tee shot and broke a picture window on the house well left of the tee box. Prior to hitting his tee shot today, Dr. Duncan was doing a mock prayer on the tee asking for strength to hit the ball straight and not break any windows.