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Debt Ceiling Drama Set to Continue...[Video] Thumbnail

Debt Ceiling Drama Set to Continue...[Video]

The Political Theatre out of Washington, DC Continues…..

Last week Congress approved a short-term debt-limit extension 11 days before the Federal Government was set to run out of cash.  The debt ceiling has once again become a political football in the midst of wrangling over the $1 trillion infrastructure bill, the $3.5 trillion social spending bill and the proposed tax changes that will pay for it all.  

Since its inception, the debt ceiling has been increased 98 times, including 17 times over the last 20 years. Raising the debt ceiling should be a routine procedure for Congress, but they can't help using it as a bargaining chip. If Congress fails to raise the debt ceiling once the new limit is reached, the U.S. government could default on its obligations - something it has never done before.  While a default is highly unlikely, more drama is expected as this short-term fix expires December 3rd.

How the Debt Ceiling Works

  • Budget Deficits are Created when Spending > Tax Revenue

Chart: Federal budget deficits have been the norm for the last 20 years

  • Budget shortfalls are funded through the sale of U.S. Treasuries which are added to the national debt.
  • The debt ceiling is the cap Congress places on the national debt.

Chart: Debt ceiling suspensions

Worried About the National Debt?

In 2020, the net interest expense paid by the U.S. government was $345 billion.  While this is a large figure, it totaled only 1.6% of gross domestic product (GDP) and 5.3% of total spending.  The ability of the U.S. to service its debt remains strong1.


1. https://www.cbo.gov/publication/56910


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