Very good Ben Carlson article on the debt ceiling soap opera

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MODERATOR NOTE: This could be a good thread if we keep politics out of it. Please do your part.
 
Basically the article argues that the debt ceiling soap opera is unlikely to result in a default: in 2011, when we came close, and S&P downgraded US debt, there was some market (both stocks and bonds) volatility for a time but no apparent long term negative effects. Also, the article adds that folks have been worried about the debt forever but as long as our economy keeps growing, we're probably ok with increases in the national debt.
 
I would add that the debt ceiling was originally a good idea in WW1 where it allowed the government to issue bonds up to the ceiling without having to get specific approval from Congress. It would appear to have outlived its usefulness and is just silly political theater nowadays.
 
^^^^ Silly is right. It’s become a farcical cottage industry.

“The debt ceiling debate makes politicians feel important. They use it as a negotiating ploy to pass or block other legislation. It’s leverage.
Could we see some crazy politician take things too far at some point and force a default? It wouldn’t surprise me but that seems like a short-term problem that would be remedied fairly quickly once they see the problems it would cause.
Politicians want to get re-elected and wrecking the U.S. economy is not a great strategy for that.”

Everyone knows their roles, all the same old arguments and exactly how it will end after much hypocritical grandstanding and causing needless pain to federal workers and contractors but they will put us through it anyway.

As for investing in the face of it, the article makes a good case for ignoring it all.
 
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I think the country would be best off by just eliminating the debt ceiling. It's the functional equivalent of refusing to pay your credit card bill because you stupidly charged up more than your credit limit even though you have the financial capacity to pay. It's stupid.

Then we would avoid these stupid political theatrics from whatever party is out of power... and both sides of the aisle partake to some degree.
 
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pb4uski said:
I think the country would be best off by just eliminating the debt ceiling.
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I think not, at least this way they have something argue about and at least think they are controlling it.
 
It’s all much ado about nothing. Neither side wants to remove the issue when they can use it as a wedge issue. And the media folks drum it up to beat on their favorite whipping boys. In the end it will pass without incident.
 
Instead of using the debt ceiling as a political ploy the energy should be spent, I think, on dealing with some of the real issues. We have real problems when it comes to mandatory and military spending that have been ignored for decades.

Everyone likes tax cuts but no one likes spending cuts.

Through the years we have pushed the can down the road and ignored these real issues and I suspect that it will go similar to the debt ceiling fiasco - wait until the last moment to deal with these issues instead dealing with them in a reasonable manner (I know reasonable is subjective).

I personally think that the debt ceiling is one of those that can easily be resolved - eliminate it. If you spend the money you should pay the bill.
 
In the short term this debt ceiling is nothing more than political theater. However in the long term there's a bigger issue. If one can print their own money any ceiling is just arbitrary. There's no checks and balances in absolute terms. I see the root problem is increase revenue will drive increase spending. It's just like people who live paycheck to paycheck. They'll spend whatever they got. While we tax people more and spend more, we rob the private sector of resources and the role of goverment expands to a socialist type goverment. Government is necessary but there has to be a balance and we need to find a sweet spot where it works best.
 
I'm not great at predictions but feel pretty confident that [-]this thread will be shut down[/-] the debt ceiling will be increased.

"Eventually" the issue with excessive spending will be resolved. How it is resolved (e.g. inflation causing a reduced standard of living for us or our decedents) will likely be very unpleasant. When that (or something else equally unpleasant) happens is unknown.
 
copyright1997reloaded said:
I'm not great at predictions but feel pretty confident that [-]this thread will be shut down[/-] the debt ceiling will be increased.
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+1 regarding the strikeout prediction. The partisan aspect of this issue is obvious for anyone following it. And yeah, it'll be increased eventually.
 
With annual federal tax receipts over $4 trillion and annual federal debt service currently running around $400 billion (>10x debt service), it would seem that a default would only happen if there was an intentional decision to do so.
 
523HRR said:
With annual federal tax receipts over $4 trillion and annual federal debt service currently running around $400 billion (>10x debt service), it would seem that a default would only happen if there was an intentional decision to do so.
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+1 ability to pay, both short term and long term, isn't really an issue at the current level of debt but ability to pay will decay over time as the debt grows if we continue to run such substantial deficits, but it is a ways away.

I don't think there are many that would disagree that the deficits need to be reduced substantially, but the rub is in the details because inevitably there will be losers in the process.

But the need to reduce deficits is not sufficient reason to f- with the creditworthiness of the US government and the economic calamity that any sustained default would cause. Both sides need to grow up and find another way to govern.
 
I'm no expert, I'm thinking the more recent permutations (IIRC beginning in 1974 plus the various "balanced budget acts" of the 80s and 90s) were designed to give legislators of both parties cover for not spending too much on goodies that are always demanded by constituents. Now those limitations have gotten in the way of spending to satisfy those same constituents. Times have changed though YMMV.
 
Beststash said:
Through the years we have pushed the can down the road and ignored these real issues and I suspect that it will go similar to the debt ceiling fiasco - wait until the last moment to deal with these issues instead dealing with them in a reasonable manner (I know reasonable is subjective).
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The whole thing reminds me of Winston Churchill's observation that "You can always trust the Americans to do the right thing. After they've exhausted all other possibilities".

Different scenario, same behavior.
 
And that’s the end of the latest season of the game show, “The Debt Ceiling.”

This season’s cast couldn’t get the ratings traction of prior ones, not because they aren’t equally good dramatic actors, but because the audience has seen the game sooooo many times before, they know how it always ends, and there is just better TV to watch elsewhere. Unfortunately, this season had to compete with the finales of both Succession and Ted Lasso.

Hats off to the characters playing journalists who did their best, as always, to build maximum fear and a fever-pitched climax. I, for one, feel like The Debt Ceiling show has jumped the shark and the producers should probably just cancel it, as it is increasingly pointless and embarrassing for everyone involved. Hollywood gossip is, the production will take a break, make some personnel changes, then try to stage a comeback in 2025, but I probably won’t watch.
 
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Markola said:
And that’s the end of the latest season of the game show, “The Debt Ceiling.”

This season’s cast couldn’t get the ratings traction of prior ones, not because they aren’t equally good dramatic actors, but because the audience has seen the game sooooo many times before, they know how it always ends, and there is just better TV to watch elsewhere. Unfortunately, this season had to compete with the finales of both Succession and Ted Lasso.

Hats off to the characters playing journalists who did their best, as always, to build maximum fear and a fever-pitched climax. I, for one, feel like The Debt Ceiling show has jumped the shark and the producers should probably just cancel it, as it is increasingly pointless and embarrassing for everyone involved. Hollywood gossip is, the production will take a break, make some personnel changes, then try to stage a comeback in 2025, but I probably won’t watch.
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But, coming to a TV or Blog near you, the whole cast and crew will return for the next round of "IMPENDING DEBT CEILING." Watch for it!
 
Koolau said:
But, coming to a TV or Blog near you, the whole cast and crew will return for the next round of "IMPENDING DEBT CEILING." Watch for it!
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Probably so! I get why they do it but successful spin-offs, like the odd Better Call Saul, are rare.
 
Nah, next year's will be the "NEW! IMPROVED! MORE DRAMA!" version. At least that what they'll be calling it.

Me, I'll be taking a nap.
 
copyright1997reloaded said:
I'm not great at predictions but feel pretty confident that [-]this thread will be shut down[/-] the debt ceiling will be increased.

"Eventually" the issue with excessive spending will be resolved. How it is resolved (e.g. inflation causing a reduced standard of living for us or our decedents) will likely be very unpleasant. When that (or something else equally unpleasant) happens is unknown.
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We are a warrior nation with 50% of our discretionary budget going to the military, something Eisenhower warned us could happen in his farewell address. I am fine with supporting Ukraine but instead of borrowing the money to do so we should have a temporary tax increase to fund that support. If the citizens are willing to support that, as I am, we should provide the support but if the citizens are not willing to support that we should not borrow to provide the support.

The highest marginal tax bracket was 92% when Eisenhower took office and he hated high taxes so it was reduced to 91% while he was in office. He did not support additional cuts until or unless the country made progress in reducing the national debt. Despite these high marginal tax rates the country grew and prospered and there was much less of an economic difference between the haves and have nots.

Today's highest marginal tax rate is 37% and I often wonder if we have more of a revenue problem than a spending problem. We probably have both.
 
Bikechuck said:
We are a warrior nation with 50% of our discretionary budget going to the military, something Eisenhower warned us could happen in his farewell address. I am fine with supporting Ukraine but instead of borrowing the money to do so we should have a temporary tax increase to fund that support. If the citizens are willing to support that, as I am, we should provide the support but if the citizens are not willing to support that we should not borrow to provide the support.

The highest marginal tax bracket was 92% when Eisenhower took office and he hated high taxes so it was reduced to 91% while he was in office. He did not support additional cuts until or unless the country made progress in reducing the national debt. Despite these high marginal tax rates the country grew and prospered and there was much less of an economic difference between the haves and have nots.

Today's highest marginal tax rate is 37% and I often wonder if we have more of a revenue problem than a spending problem. We probably have both.
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I have two words for you about tax rates and revenue. Art Laffer.
 
The debt ceiling Kabuki theater isn't without real costs. S&P never restored our country's AAA rating after it was downgraded in 2011. Now Fitch is considering downgrading our debt even after the debt ceiling deal was reached: https://www.politico.com/news/2023/...-cut-u-s-debt-rating-even-after-deal-00099940
Fitch Ratings on Friday warned that it could still downgrade the U.S.’s credit rating even after Congress passed a bill that averts an unprecedented default on government debt.

While the deal to raise the debt ceiling and cut spending are “positive considerations,” Fitch said “repeated political standoffs” over the federal government’s borrowing limit “lowers confidence in governance on fiscal and debt matters.”
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