https://www.thebalance.com/u-s-debt-...crises-3305868
SNIPPET:
What Happens When the Debt Ceiling Isn't Raised
As the debt approaches the ceiling, Treasury can stop issuing notes, and borrow from its retirement funds. These funds exclude Social Security and Medicare. It can withdraw around $800 billion it keeps at the Federal Reserve bank.
Once the debt ceiling is reached, Treasury cannot auction new notes. It must rely on incoming revenue to pay ongoing federal government expenses. That happened in 1996 when Treasury announced it could not send out Social Security checks. Competing federal regulations make it unclear how Treasury could decide which bills to pay and which to delay. Foreign owners would get concerned that they may not get paid. See What Is the U.S. Debt to China?
If Treasury did default on its interest payments, three things would happen. First, the federal government could no longer make its monthly payments.
Employees would be furloughed and pension payments wouldn't go out. All those receiving Social Security, Medicare and Medicaid payments would go without. Federal buildings and services would close.
Second, the yields of Treasury notes sold on the secondary market would rise. That would create higher interest rates. This would increase the cost of doing business and buying a home. It would slow down economic growth.
Third, owners of U.S. Treasurys would dump their holdings. That would cause the dollar to plummet. The dollar’s drastic decline could eliminate its status as the world's reserve currency. The standard of living in America would decline. In this situation, the United States would find itself unable to repay its debt.
For all these reasons, Congress shouldn't monkey around with raising the debt ceiling. If members are concerned about government spending, they should get serious about adopting a more conservative fiscal policy long before the debt ceiling needs to be raised.
What Happens When the Debt Ceiling Is Raised
Continuing to raise the debt ceiling is how America wound up with a $20 trillion debt. The debt ceiling has become a joke. It has become more like a speed limit sign that is never enforced. In the short-term, there are positive consequences to raising the debt ceiling. America continues to pay its bills. Consequently, it has avoided a total debt crisis.
The long-term consequences are severe. That's because the paper-thin debt ceiling is apparently the only restraint on out-of-control government spending. A 2017 surveyfound that 57 percent of Americans said Congress should not raise the debt ceiling. Only 20 percent said it should be raised. But they don't want their taxes raised or their services cut.
Benjaminis
SNIPPET:
What Happens When the Debt Ceiling Isn't Raised
As the debt approaches the ceiling, Treasury can stop issuing notes, and borrow from its retirement funds. These funds exclude Social Security and Medicare. It can withdraw around $800 billion it keeps at the Federal Reserve bank.
Once the debt ceiling is reached, Treasury cannot auction new notes. It must rely on incoming revenue to pay ongoing federal government expenses. That happened in 1996 when Treasury announced it could not send out Social Security checks. Competing federal regulations make it unclear how Treasury could decide which bills to pay and which to delay. Foreign owners would get concerned that they may not get paid. See What Is the U.S. Debt to China?
If Treasury did default on its interest payments, three things would happen. First, the federal government could no longer make its monthly payments.
Employees would be furloughed and pension payments wouldn't go out. All those receiving Social Security, Medicare and Medicaid payments would go without. Federal buildings and services would close.
Second, the yields of Treasury notes sold on the secondary market would rise. That would create higher interest rates. This would increase the cost of doing business and buying a home. It would slow down economic growth.
Third, owners of U.S. Treasurys would dump their holdings. That would cause the dollar to plummet. The dollar’s drastic decline could eliminate its status as the world's reserve currency. The standard of living in America would decline. In this situation, the United States would find itself unable to repay its debt.
For all these reasons, Congress shouldn't monkey around with raising the debt ceiling. If members are concerned about government spending, they should get serious about adopting a more conservative fiscal policy long before the debt ceiling needs to be raised.
What Happens When the Debt Ceiling Is Raised
Continuing to raise the debt ceiling is how America wound up with a $20 trillion debt. The debt ceiling has become a joke. It has become more like a speed limit sign that is never enforced. In the short-term, there are positive consequences to raising the debt ceiling. America continues to pay its bills. Consequently, it has avoided a total debt crisis.
The long-term consequences are severe. That's because the paper-thin debt ceiling is apparently the only restraint on out-of-control government spending. A 2017 surveyfound that 57 percent of Americans said Congress should not raise the debt ceiling. Only 20 percent said it should be raised. But they don't want their taxes raised or their services cut.
Benjaminis
