Tag Archives: Debt Ceiling

When They Say the US Government Has Never Defaulted They’re Lying, by Michael Maharrey

Posted on February 14, 2023 | Leave a comment

And don’t rule out default in the future. From Michael Maharrey at schiffgold.com:

The fake debt ceiling fight is on and the Biden administration has ratcheted up the scare tactics. One of its strategies is to make you think the world will collapse if the US defaults on its debt obligations. After all, the US always pays its bills on time — so we’re told.

A default would certainly be problematic. But despite what you’re being told, it’s not unprecedented. The US government has defaulted before.

I call this a fake debt ceiling fight because we all know how it will end. Congress will raise the debt ceiling. It may or may not come with some modest spending cuts. But we all know that any cuts will be superficial. Actual spending will keep going up. It always does.

But right now, we have to endure the dog and pony show as Republicans and Democrats haggle.

Republicans say they want spending cuts. (One has to wonder where this urgency was when the GOP controlled both houses of Congress and the White House, but that’s a discussion for another time.) Democrats say they won’t negotiate.

And here we are.

To fortify their position, the administration tells us that raising the debt ceiling is a matter of economic life and death. As I mentioned, the mantra is the US always pays its bills on time. As Mises Institute senior editor Ryan McMaken pointed out, as part of the strategy, Treasury Secretary Janet Yellen is parroting the oft-repeated claim that the US has never defaulted.

Continue reading→

Leave a comment

Posted in Banking, Business, Debt, Government, Politics

Tagged

It’s Over: The Democrats And The Republicans Are Both Conspiring To Bankrupt America And Destroy Our Future, by Michael Snyder

Posted on July 23, 2019 | Leave a comment

The numbers don’t lie, and when they get big enough, which they probably are already, they show no mercy. From Michael Snyder at endoftheamericandream.com:

Both major political parties are working together to destroy America’s financial future, and most Americans don’t seem to care.  Once upon a time, the Republicans were considered to be “the party of fiscal responsibility”, but now they are just as bad as the “free spending” Democrats.  As you will see below, a “compromise” budget deal was just reached which will dramatically increase federal spending and will suspend the federal debt limit until after the next election.  In other words, both sides are conspiring to make our debt problem much, much worse over the next year and a half, and this should be causing howls of outrage all across America.  But instead most Americans seem content to go along with the free spending ways of our political leaders, and only a handful of voices are sounding the alarm as we steamroll toward financial oblivion.

When Barack Obama was inaugurated on January 20th, 2009, the U.S. national debt was sitting at a grand total of $10,626,877,048,913.08.

Of course we proceeded to go on the greatest debt binge in the history of our nation, and when Obama’s two terms ended the U.S. national debt had risen to $19,947,304,555,212.49.

Then Donald Trump took office, and we have continued to rack up debt at a staggering pace.  In fact, at this moment the U.S. national debt is $22,023,119,533,123.43.

So over the last 10 and a half years, we have added just under 11.4 trillion dollars to our mountain of debt.  And when you break that down, that means that our politicians have been stealing more than 100 million dollars every single hour of every single day from future generations of Americans during the Trump/Obama era.

Continue reading→

Leave a comment

Posted in Collapse, Debt, Economy, Government

Tagged ,

US Gross National Debt Jumps $723 billion in 12 Weeks, Yellen “Very Worried about Sustainability of US Debt Trajectory”, by Wolf Richter

Posted on November 30, 2017 | Leave a comment

Put almost a quarter of a trillion dollars on the liability side of the ledger in less than 3 months and you’re wracking up some heavy debt. From Wolf Richter at wolfstreet.com:

But only a few lost souls in Congress care.

Even as lawmakers are trying to cobble together a tax-cut bill that would cut revenues by $1.5 trillion over ten years, the gross national debt has spiked $723 billion over the past 12 weeks since Congress suspended the “debt ceiling.” It just hit $20.57 trillion, or 105% of GDP.

Over the past six years, since November 2011, the gross national debt has surged nearly 40%, or by $5.8 trillion. Back in 2011, gross national debt amounted to 95% of GDP. Before the Financial Crisis, it was at 63% of GDP. There are no signs that the relentless rise in the debt is slowing down. On the contrary – the tax cuts are going to steepen the curve:

In the chart above, note the last three debt-ceiling fights – the flat lines in 2013, 2015, and 2017, followed each time by an enormous spike when the debt ceiling was lifted or suspended, and when the “extraordinary measures” with which the Treasury keeps the government afloat were reversed.

And the Fed is getting increasingly nervous about the “sustainability” of this debt.

There are only a few lawmakers left in Congress that have a sense of fiscal responsibility. One of the lost souls is Senator Bob Corker, a Republican from Tennessee, who, to address his anxieties about the deficit and the debt, wants to add a provision to the tax-cut bill that would raise taxes automatically if the economy doesn’t hit certain growth targets in the future. This “trigger” is designed to slow by a smidgen the relentless rise of the national debt. He has come under withering criticism for it from Republican lawmakers and conservative lobbying groups.

Fitch Ratings believes that “under a realistic scenario of tax cuts and macro conditions,” the US gross national debt will balloon to 120% of GDP by 2027. The way things are going right now, that is likely an impossibly rosy scenario.

To continue reading: US Gross National Debt Jumps $723 billion in 12 Weeks, Yellen “Very Worried about Sustainability of US Debt Trajectory”

Leave a comment

Posted in Debt, Economy, Government

Tagged ,

The Old Songs, by James Howard Kunstler

Posted on November 24, 2017 | Leave a comment

It’s only a matter of time before America realizes its broke. From James Howard Kunstler at kunstler.com:

What if the fun and games of 2017 are over? The hidden message behind the sexual harassment freak show of recent weeks is that nothing else is sufficiently serious to occupy the nation’s attention. We’re living in the Year of Suspended Reality, stuck in the sideshow and missing the three-ring circus next door in the big tent.

It probably all comes down to money. Money represents the mojo to keep on keeping on, and there is probably nothing more unreal in American life these days than the way we measure our money — literally, what it’s worth, and what everything related to it is worth. So there is nothing more unreal in our national life than the idea that it’s possible to keep on keeping on as we do.

The weeks ahead may be most illuminating on this score. The debt ceiling suspension runs out on December 8, around the same time that the tax reform question will resolve one way or another. The debt ceiling means that the treasury can’t issue any more bonds, bills, or notes. That is, it can’t borrow any more money to pretend the government can keep running. Normally these days (and it’s really very abnormal), the treasury pawns off paper IOUs to the Federal Reserve and the Fed makes digital entries on various account ledgers that purport to be “money.” And, by the way, the Fed is a consortium of private banks not a department of government — which is surely one of a thousand ways that the public is confused and deceived about what condition our condition is in, as the old song goes.

There’s a fair chance that congress may not be able to resolve the debt ceiling deadline. The votes may just not be there. If the deadline comes and goes, the treasury can only use incoming tax revenues to cover its costs, and it won’t be enough. It will have to choose whether it issues paychecks to the roughly 2.7 million US government employees, or pays the vendors that sell things like warplanes to the military, or pay out so-called entitlements like Medicare and SNAP cards, or pay the interest on the previously-issued bonds, debts, and bills that the US has racked up over the years. Believe it or not, making those interest payments is probably the top priority, because failing to do that would shove the nation officially into default for the first time and destroy the country’s credit standing. The full faith and credit in the US dollar would shatter.

To continue reading: The Old Songs

Leave a comment

Posted in Collapse, Debt, Economics, Economy, Government, Money

Tagged

America’s Fiscal Doomsday Machine, by David Stockman

Posted on September 13, 2017 | Leave a comment

Washington will not let the debt ceiling stop the Doom Loop. From David Stockman at dailyreckoning.com:

Maybe the Democrats did win the 2016 election. Or at least the the Deep State and its accomplices among the beltway political class, K-Street lobbies and the media did.

That’s because the media won a giant victory against something they deplore and despise more than anything else — the public debt ceiling. They sanctimoniously admonish that it’s a relic of the nation’s fiscally benighted past. They operate on a belief that this is an episodic tendency to threaten America’s credit and to offer Capitol Hill an opening to grandstand about the fiscal verities is a blight on orderly governance.

So the Donald’s latest burst of impetuosity — agreeing with Sen. Schumer to permanently abolish the public debt ceiling — has descended on the beltway like manna from heaven. Not Barack Obama, Bill Clinton, Jimmy Carter or even the Great Texas Porker, Lyndon Johnson, dared to utter the thought of it — at least not in polite company.

Suddenly, and notwithstanding all the good he has done disrupting the status quo, the Donald has become the foremost enemy of America’s very financial survival.

The Federal budget is a Fiscal Doomsday Machine. The depository of American wars and entitlements have run rampant. Under the pile drivers of a global empire and the retiring baby boom, it is rapidly propelling the nation toward fiscal catastrophe. That grim outcome is virtually guaranteed if the only remaining safety brake — the debt ceiling — is summarily abolished.

Due to entitlements, debt service and the slow pipeline of appropriated spending there is no such thing as an annual Federal budget or accountability for how much Uncle Sam spends and borrows. Instead, the $4.1 trillion that Congressional Budget Office (CBO) projects the Federal government will spend in FY 2018, and the $563 billion it will borrow, reflects the dead hand of the past.

Entitlements and other mandatory spending alone is projected to reach $2.566 trillion or 63% of total FY 2018 outlays.

Another $307 billion will be required for interest on the nation’s $20 trillion public debt, while upwards of half the $1.22 trillion for so-called “discretionary” or appropriated programs also reflects funds appropriated years ago.

Altogether, $3.5 trillion, or 85% of outlays, will be essentially baked into the cake before a single Congressional vote is taken on anything regarding the FY 2018 budget.

To continue reading: America’s Fiscal Doomsday Machine

Leave a comment

Posted in Debt, demographics, Economy, Government

Tagged

Congress Exploits Hurricane to Raise Debt Ceiling, by Ron Paul

Posted on September 11, 2017 | Leave a comment

Raised as it is every times it comes up, the debt ceiling hasn’t enforced fiscal discipline on Washington. However, it does temporarily shine a light on the debt, which isn’t a bad thing. From Ron Paul at ronpaulinstitute.org:

Former White House Chief of Staff Rahm Emanuel famously counseled politicians to never let a crisis go to waste. Sadly, this week President Trump and congressional leaders of both parties showed that they have taken this advice to heart when they attached a debt ceiling increase and an extension of government spending to the over 15 billion dollars Hurricane Harvey relief bill.

This maneuver enabled Congress to avoid a contentious debate over whether to pass a clean debt ceiling increase or to pair it with spending cuts. After all, few members of Congress want to be accused of blocking a bipartisan deal to help those suffering from Harvey over what the media will spin as a “right-wing anti-government” crusade.

Combining hurricane relief with a debt ceiling increase and an extension of government funding had bipartisan support. Days before President Trump sat down with Democrats to hammer out a deal, Capitol Hill was abuzz with talk about a Senate GOP plan to attach a debt ceiling increase and an extension of government funding to the hurricane bill.

If, as was reported in the media, the GOP leadership objected to Trump’s deal, they could have refused to bring it up for a vote. After all, as Senator John McCain wrote this week, Congress does not work for President Trump. But, the deal quickly passed in the House and the Senate with large bipartisan majorities. As is common in DC, the parties agreed on the principle, and they only squabbled over the details.

A refusal to raise the debt ceiling would not cause the government to default; it would simply force Congress to set spending priorities and make real spending cuts. In contrast, raising the debt ceiling allows Congress to continue to run up more debt in order to grow the government. The American people will pay for these deficits either directly through an increase in the income tax and other federal taxes, or indirectly through the inflation tax.

To continue reading: Congress Exploits Hurricane to Raise Debt Ceiling

Leave a comment

Posted in Debt, Government

Tagged ,

Trump Dumps the Do-Nothing Congress, by Patrick J. Buchanan

Posted on September 8, 2017 | Leave a comment

President Trump fires a shot across congressional Republicans bow. Don’t bet they’ll get their act together. From Patrick Buchanan at buchanan.org:

Donald Trump is president today because he was seen as a doer not a talker. Among the most common compliments paid him in 2016 was, “At least he gets things done!”

And it was exasperation with a dithering GOP Congress, which had failed to enact his or its own agenda, that caused Trump to pull the job of raising the debt ceiling away from Republican contractors Ryan & McConnell, and give it to Pelosi & Schumer.

Hard to fault Trump. Over seven months, Congress showed itself incapable of repealing Obamacare, though the GOP promised this as its first priority in three successive elections.

Returning to D.C. after five weeks vacation, with zero legislation enacted, Speaker Paul Ryan and Majority Leader Mitch McConnell were facing a deadline to raise the debt ceiling and fund the government.

Failure to do so would crash the markets, imperil the U.S. bond rating, and make America look like a deadbeat republic.

Families and businesses do this annually. Yet, every year, it seems, Congress goes up to the precipice of national default before authorizing the borrowing to pay the bills Congress itself has run up.

To be sure, Trump only kicked this year’s debt crisis to mid-December.

Before year’s end, he and Congress will also have to deal with an immigration crisis brought on by his cancellation of the Obama administration’s amnesty for the “Dreamers” now vulnerable to deportation.

He will have to get Congress to fund his Wall, enact tax reform and finance the repair and renewal of our infrastructure, or have his first year declared a failure.

We are likely looking at a Congressional pileup, pre-Christmas, from which Trump will have to call on Chuck Schumer and Nancy Pelosi, again, to extricate him and his party.

The question that now arises: Has the president concluded that working with the GOP majorities alone cannot get him where he needs to go to make his a successful presidency?

To continue reading: Trump Dumps the Do-Nothing Congress

Leave a comment

Posted in Debt, Government, Politics

Tagged , ,

A Hot Mess, by James Howard Kunstler

Posted on September 1, 2017 | Leave a comment

James Howard Kunstler finds potential catalysts for cataclysm in Hurricane Harvey and the impending debt ceiling contretemps. From Kunstler at kunstler.com:

It wasn’t until more than a week after Hurricane Katrina slammed into New Orleans in 2005 that the full extent of the damage was recognized and so it will go with the hot mess where Houston used to be. Mostly, it is inconceivable that the business activity which made Houston the nation’s fourth largest city and, according to Chris Martenson, equal to the 10th largest economy in the world, will ever return to what it was before August 26, 2017.

The major activity there has been the refining and distribution of oil products, and no activity is more central to the functioning of the US economy. So the public and our currently clueless leaders across the political spectrum, plus a legacy news media lost in the carnival of race and gender freak shows, is about to discover the dynamic relationship between energy and an industrial economy.

The pivot in this relationship is banking, which enables the conversion of oil’s raw power into everything else that goes on in a so-called advanced economy. The popular assumption is that federal disaster relief can compensate for all losses. That assumption may go out the window with the Houston flood of 2017. And no amount of federal aid can compensate for the hours, days, and weeks that will tick by as businesses struggle to return to something like their former level of normal operation.

Many businesses will never recover, especially the smaller ones that support the big one — the little tool and die shops, the construction outfits, the trucking and shipping concerns, the riggers and pipefitters, the cement companies, and so on. All of that activity existed in highly rationalized chains of on-time production and service and nothing will be on-time in Houston for a long time to come. The arguments over insurance coverage have not even begun, and then there is the question of how businesses in this perpetual flood zone will renew their insurance. Or how might they relocate to higher ground? And how do they pay for that? And where is higher ground in this vast, swampy lowland?

To continue reading: A Hot Mess

 

Leave a comment

Posted in Collapse, Debt, Economy, Energy, Government

Tagged ,

The Imperial City’s Fiscal Waterloo, by David Stockman

Posted on July 20, 2017 | 3 comments

David Stockman lays out the impending bloodbath. From Stockman at dailyreckoning.com:

It’s all over now except the shouting about Obamacare repeal and replace, but that’s not the half of it.

The stand by Senators Lee and Moran was much bigger than putting the latest iteration of McConnell-Care out of its misery. The move rang the bell loud and clear that the Imperial City has become fiscally ungovernable.

That means there is a chamber of horrors coming. With it, an endless political and fiscal crisis that will dominate Washington for years to come. Its cause is deep and structural.

Found Fathers, Fiscal Crisis and the Washington of Today

The founders, in fact, were small government de-centralists and non-interventionists. That’s why they agreed to Madison’s contraption of redundant checks and balances.

Aside from ruthlessly ambitious Alexander Hamilton, the founders wanted a national government that was hobbled by levels of hurdles and vetoes. They wanted a government that could act sparingly and only after thorough deliberation and consensus building.

And that made sense. After all, most believed that the 10th amendment was the cornerstone of the Constitution.  Neither Washington or Jefferson envisioned the political and fiscal burdens of running an empire.

“It is our true policy to steer clear of permanent alliance with any portion of the foreign world.” That was George Washington’s Farewell Address to us.

The inaugural pledge of Thomas Jefferson was no less clear in stating, “Peace, commerce, and honest friendship with all nations-entangling alliances with none.”

So when Woodrow Wilson embarked the nation on the route of Empire in April 1917 and FDR launched the domestic interventionism of the New Deal in March 1933, the die was cast. It was only a matter of time before the disconnect between a robust Big Government and the structural infirmities of Madison’s republican contraption resulted in a deadly impasse.

The Fed has now backed itself into a corner and is out of dry powder. Even its Keynesian managers are determined to normalize and shrink a hideously bloated balance sheet. The current account has no basis in sustainable or sound finance.

The time of fiscal reckoning has come. With the financial sedative of monetization on hold, bond vigilantes will soon awaken from their 30 year slumber.

To continue reading: The Imperial City’s Fiscal Waterloo

3 Comments

Posted in Debt, Government, Uncategorized

Tagged ,

Coming Soon: The Mother Of All Debt Ceiling Crises, by David Stockman

Posted on June 13, 2017 | Leave a comment

The clock is ticking on the debt ceiling, and if it’s not increased, it may throw Washington and financial markets into chaos. From David Stockman at dailyreckoning.com:

While the Imperial City is frozen in the Second Coming of Comey, it doesn’t mean that the Washington spending machine is on pause. In fact, the Treasury’s cash balance yesterday stood at only $153 billion — down by $130 billion just since the tax season peak was reached on April 25th.

Uncle Sam has been burning cash at a rate of $3.2 billion per calendar day since then and has no more room to borrow. That’s because the public debt ceiling is frozen at its March 15th level ($19.808 trillion) and the mavens at the Treasury Building have run out of borrowing gimmicks.

The countdown to the mother of all debt ceiling crises is now well underway — with the nation’s net debt sitting at $19.69 trillion. That figure, in turn, is up nearly $500 billion since FY 2016 ended on September 30 with the net debt at $19.22 trillion.

We itemize this torrent of red ink not merely to lament the nation’s dire fiscal plight, but to document a practical point. It will be impossible to pay Uncle Sam’s bills in full after Labor Day unless the debt ceiling is raised well the $20 trillion mark.

Exactly 36 years ago, Washington stood on another symbolic threshold — that is, raising the debt ceiling over the $1 trillion markfor the first time.

Back in October 1981, however, the Gipper was in the Oval Office at the peak of his popularity. He got the debt ceiling over the symbolic barrier at that time because he could still credibly promise that the budget would be balanced within three years. That was after his already enacted tax cuts became fully effective and the already enacted spending reductions took hold.

The nation’s balance sheet then was relatively pristine compared to what it is at present. Even at $1 trillion, the public debt amounted to just 30%of GDP — a far cry from the 106% ratio presently.

Reagan vs Trump Debt Ceiling

Before Capitol Hill gets bogged down in a sweaty August slog desperately looking for votes to raise the debt ceiling by several trillion dollars, it will have mid-year budget updates. They won’t be encouraging.

To continue reading: Coming Soon: The Mother Of All Debt Ceiling Crises

Leave a comment

Posted in Debt, Government, Uncategorized

Tagged