Dear MEL Topic Readers,
American living standards are on the line in the debt ceiling drama
In the US, the debt ceiling is a limit on the amount of national debt that the federal government can pay off the debt and spend. Since it is a legislative limit, it requires heated political debate and negotiation to decide how much more debt to be allowed in the respective fiscal year. Since 1960, the US Congress has raised or extended the debt limit nearly 80 times, over every fiscal year. If it failed to raise the limit, the US government wouldn’t be able to finance essential operations, such as national defense, Social Security, and Medicare. It is catastrophic for the economy and people’s lives not only in the US but also in the world as a default would trigger a sharp rise in the cost of borrowing. Indeed, the US dollar is the most trusted world reserve currency. Since the economy is based on confidence, US’s default on the debt would crush the financial market, business, and consumer confidence around the world. The question now is if the US needs to keep the debt ceiling in each fiscal year. An all-or-nothing approach might be too problematic than just approving each fiscal year’s budget.
https://edition.cnn.com/2023/04/27/economy/us-living-standards-debt-ceiling/index.html
American living standards are on the line in the debt ceiling drama
In the US, the debt ceiling is a limit on the amount of national debt that the federal government can pay off the debt and spend. Since it is a legislative limit, it requires heated political debate and negotiation to decide how much more debt to be allowed in the respective fiscal year. Since 1960, the US Congress has raised or extended the debt limit nearly 80 times, over every fiscal year. If it failed to raise the limit, the US government wouldn’t be able to finance essential operations, such as national defense, Social Security, and Medicare. It is catastrophic for the economy and people’s lives not only in the US but also in the world as a default would trigger a sharp rise in the cost of borrowing. Indeed, the US dollar is the most trusted world reserve currency. Since the economy is based on confidence, US’s default on the debt would crush the financial market, business, and consumer confidence around the world. The question now is if the US needs to keep the debt ceiling in each fiscal year. An all-or-nothing approach might be too problematic than just approving each fiscal year’s budget.
https://edition.cnn.com/2023/04/27/economy/us-living-standards-debt-ceiling/index.html
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