As of today, the US debit is larger than $28 Trillion dollars and growing by the second. We have reached our debt ceiling for this year and Congress needs to rapidly raise it if we want to achieve harmony in the near term. What does that mean? We will run out of money by October 15th, 2021 if this situation is not remedied.
The House has passed a bill that would keep the government open until December but suspends any other spending until 2022, but they need Senate passage to act. The last big hoopla was in 2011 under the Obama administration that led to the US AAA credit rating dropping in the wake of slower economic growth and the European debt crisis.
Governments generally want to reduce debt and keep the economy stimulated. Many times instead of raising taxes governments decide to issue bonds to help them raise or borrow money. However, the current economic climate is such that those interest rates are not very high (2.45% on the 30 year bond) and investors are not inclined to park money there with the prospect of little return.
Democrats and Republicans will have to work hand in hand to ensure that we avert shutting down our government come October 1st as the deadline looms larger. It’s hard to believe that in prior decades they did work together given their seemingly intractable differences now.
Even within the Democratic party there are disagreements amongst the best path forward given that there is a proposal for $3.1 Trillion dollars for reconciliation and $1.2 Trillion for updating infrastructure on the bill they hope to pass. They will need to agree on a temporary spending bill by Thursday evening (September 30th) to avoid a shutdown. In the past twenty years congress has raised the debt at least a dozen times.
Not working together to remedy our debt ceiling and funding our government might cause a recession, which the US could ill afford given all of the economic pressures of the pandemic. Subtle changes in our economic landscape also shift things in the macro-environment. The stock market in some sectors is floundering and will probably not find much support or homeostasis until this agreement is signed and delivered. With returns stymied dwindling investors may decide to pull money from the market making it slump further. The CPI or Consumer Price index has risen slightly from 5% to 5.4%, but that is no great shake. Organizations that might want, or need to, hire more employees for the upcoming holiday season may hold off and that would have a bad affect on our unemployment numbers and the jobless situation.
We are already saddled with shortages of multitudes of items that we once took for granted to always be there. Amongst some of the most noticeable are the semiconductors and other items noteworthy to our technology sector. Heating and cooling costs have risen over 41% this past year. Housing prices have skyrocketed and so have rents making both unattainable to the regular workers across our nation. If people’s fundamental needs go unmet we will see increases in crime across the board. Inflation has risen (at a 13 year high) to levels that rival those in the 2008 economic bust. Consumer goods are at all-time highs and there appears to be no ceiling in sight. Even Christmas trees are slated to be in short supply this holiday season.
It would be imprudent for our leaders to not act and most in the know think they will come together. However, those who are up for midterm reelection will be the most cautious about their approaches since they do not want to jeopardize their seats. Let’s hope they do the right thing for our people and our government sooner rather than later.
References:
https://www.investopedia.com/articles/economics/11/successful-ways-government-reduces-debt.asp