Tuesday, September 5, 2017

US must raise the $19.9 trillion debt limit by month end

The debt ceiling, or debt limit, is a cap set by Congress on the gross debt the U.S. Treasury may incur. It was established in its present form by the Public Debt Acts of 1939 and 1941.

Congress must approve another debt limit and set new spending by September 30 to stave off a government shutdown. The last debt limit was hit in March. The Treasury Department used accounting maneuvers to buy Congress several months to raise the limit.
If you skip your credit card bill, your bank imposes a penalty, making your financial problems far worse. It's similar with the US government. But, because the debt is so large, the consequences of even a tiny hike in interest rates could be catastrophic.

If markets believe that there is even a slim chance the U.S. might not pay its bills — and that's assured if the debt limit isn't raised — investors will demand that the U.S. pay more to borrow in the form of higher interest rates. A 2011 standoff in which the limit wasn’t raised until the last minute caused Standard & Poor's to downgrade the US's AAA credit rating for the first time. The delay in raising the limit caused the Treasury to pay an additional $1.3 billion in borrowing costs for that year alone.
Trump sided with hard-liners in 2013, opposing any increase. “I cannot believe the Republicans are extending the debt ceiling — I am a Republican & I am embarrassed!” he tweeted then. His tune will have changed significantly this time around.
national debt