Casual economic and stock market watchers are going to read and hear a great deal about the current U.S. government shutdown and the debt ceiling debate over the next week. I thought that it might to summarize some of the most important items involved in the gridlock.
The U.S. government legislators set a legal limit for how much money the federal government can borrow. When that limit is reached, the U.S. government is technically “out of money.”
If the U.S. government legislators do not authorize a raise in the debt ceiling by October 17th, the U.S. government will have no longer be able to borrow money by issuing government debt.
So October 17th is the first important date to watch. The second important date is October 31st, when the U.S. Treasury will run out of money to pay the bills of the U.S. government.
The deadlock in the U.S. Congress is the same old debate about spending cuts versus raising the debt ceiling.
The U.S. Congress needs a real world economics lesson. That lesson would begin with balancing the national budget every year. Those legislators need to manage the finances of the United States like every other American manages their personal finances.
The politicians in Washington are playing a game of chicken with the credit worthiness of the U.S. government. I hope that some amount of good comes out of this historic deadlock.
The United States has always paid its national debts. If a default does take place, the possible negative investment consequences may include plunging stock markets, rising interest rates and a huge hit to an already weak economic recovery.
Why would the U.S. Congress intentionally do that to the American public?
The President is to blame as well. His hard line position relies on convincing the Republicans in the House of Representatives that he will not cave in.
Ric Lager
Lager & Company, Inc.
