Sunday, March 19, 2017

Debt Ceiling Deadline Passes Uneventfully

The March 15th Debt Ceiling Deadline passed quietly with very little media attention or comment from either the Trump Administration or Congress. This Bloomberg article suggests the reason is that everyone is happy to put it off for several months and that no one sees it as a coming crisis. If that is correct, David Stockman missed completely on his forecast that this would lead to a major crisis by summer. Time will tell. Here are a couple of excerpts.


. . . .
"Republican leaders, who control both chambers of Congress and the White House, are insisting there won’t be a repeat of the brinkmanship of recent years, where conservatives have flirted with defaulting.
Senate Majority Leader Mitch McConnell told reporters last week that “of course” the limit will get a boost. “The government is not going to default,” he told reporters.
Even the chairman of the conservative House Freedom Caucus, which led recent standoffs over the debt limit, downplays the risk.
"I don’t see a showdown," said Representative Mark Meadows, a North Carolina Republican. "I think that all us believe that a debt ceiling increase with the appropriate amount of real balanced-budget directives is accomplishable under this president and a unified government."
. . . .
"For now, Wall Street traders and firms that rate U.S. debt don’t expect the types of fireworks that occurred in 2011, when debt-limit showdowns nearly resulted in default on obligations to bondholders. In a report released Monday morning, Moody’s Investors Service said it sees no near-term credit risks after the U.S. debt limit -- suspended after yet another budget battle -- is reinstated.

We expect Congress to agree to raising the debt ceiling, though this legislative process is likely to take months,” the report said.
. . . . .
"The Bipartisan Policy Center, a Washington-based think tank, estimated in early March that Treasury will run out of extraordinary steps to stay under the limit in October or November.
Lawmakers in both parties say that’s just fine with them.
“We haven’t finished the 2017 budget yet, and we’re awaiting the 2018 budget,” said Senator Jack Reed, a Rhode Island Democrat. “They’ve got Affordable Care Act repeal and replace issues. At some point we anticipate some tax reform proposal. All of that makes for so many different variables. This is just one part of a much-bigger picture. When we get more clarity, we’ll be in a better position to think about the complications of the debt ceiling.”


Added note: Here is a video by Mike Maloney that has an interesting look at the history of the US debt and debt ceiling. It's worth the time to look at. Note how all discipline in government spending seems like it was virtually abandoned after 1971 when Nixon ended the link between the US dollar and gold.This is why many people want something to control the ability to create money and government spending. 

HIstory shows us what politicians do without any real controls in place. You end up like this with every taxpayer obligated for more than $165,000 in US debt and future obligations calculated at over $875,000 per taxpayer. Please note that the cash savings per US family is less than $10,000 ( a four person family currently owes over $244,000 in US debt already accumulated -- 4 x $61,000 per citizen).

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