News Article: Treasury secretary says US to hit debt limit on Jan. 19

[Bamaro]

Treasury Secretary Janet Yellen told congressional leaders Friday the U.S. would hit its debt limit next week -- setting up a showdown between Democrats, the White House and House Republicans, who have vowed to tie any increase in the debt ceiling to spending cuts.

The nation will reach its $31.4 trillion borrowing limit on Jan. 19, Yellen said in a letter, adding that the Treasury Department will begin implementing so-called "extraordinary measures" to manage the government’s cash flow if lawmakers don't act to raise it.

“While Treasury is not currently able to provide an estimate of how long extraordinary measures will enable us to continue to pay the government’s obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June,” Yellen wrote in the letter.

I'm sure the republicans will have regained a fiscal conscience again since there is a dem in the WH.

 

[Tidewater]

 

[Bazza]

 

[selmaborntidefan]

I'm sure the republicans will have regained a fiscal conscience again since there is a dem in the WH.

Well, of course!!

You see, the BACON WE LIKE is good for you....but YOUR BACON is.....shall we say.....BAD for everyone...

(My ex-wife amazingly thinks everyone should be straight with her all the time - but it's okay for her to lie when she wants to do so; the woman is AMAZINGLY able to see how decisions will result in disaster for almost everyone EXCEPT herself - it's quite fascinating tbh with you).

 

[Tidewater]

Eventually, creditors will come to the conclusion that the US can never repay the money.
That day will be a world-historical moment.

 

[selmaborntidefan]

Eventually, creditors will come to the conclusion that the US can never repay the money.
That day will be a world-historical moment.

Not that you're wrong, but I've been hearing that for my entire life - and in all honesty, I think that's part of why the DC Mob figures "we've been hearing this since the 1930s and it's never happened." And no politician is going to make the hard choices and cut anything because there's always the next election and always someone else out there without a voting record who can hang you on your own.

 

[AWRTR]

Eventually, creditors will come to the conclusion that the US can never repay the money.
That day will be a world-historical moment.

We are still the best bet, and that should tell you how bad the rest of the world is. Someday it will come home to roost. I’m hope I’m long gone when it does. The problem may hit when we have to start printing money to pay the interest on the debt. Those interest payments just keep going up over time and will eventually dominate the budget. That is still a ways off but it will happen. That money printing could send us into an inflation spiral. Hope I’m super wrong about all of that.

 

[Tidewater]

We are still the best bet, and that should tell you how bad the rest of the world is. Someday it will come home to roost. I’m hope I’m long gone when it does. The problem may hit when we have to start printing money to pay the interest on the debt. Those interest payments just keep going up over time and will eventually dominate the budget. That is still a ways off but it will happen. That money printing could send us into an inflation spiral. Hope I’m super wrong about all of that.

Agree on all points.

This is a picture of a German woman feeding bundles of Reichsmarks into the furnace for heat because they were cheaper than coal. We all know how that hyperinflation period worked out for Germany.

In the end, that is what the US will do. They will simply turn on the printing presses and print our way out of this, consequences be darned. Those who own real estate will do better than those with financial instruments. They will be screwed.

 

[Bamaro]

31T in debt shows how useless this 'debt ceiling' law is. In practice, it seems like all it does is give various sides an opportunity to posture and pretend that deficits/debt mean anything at all to them. I seriously doubt that this law has ever made any significant progress in reigning in any spending at all.
Why not repeal it?

 

[UAH]

We are still the best bet, and that should tell you how bad the rest of the world is. Someday it will come home to roost. I’m hope I’m long gone when it does. The problem may hit when we have to start printing money to pay the interest on the debt. Those interest payments just keep going up over time and will eventually dominate the budget. That is still a ways off but it will happen. That money printing could send us into an inflation spiral. Hope I’m super wrong about all of that.

Hasn't that already begun! Seriously QE by the Fed is the most egregious episode of printing money in our history. I suppose 8-10% inflation is mild in comparison to that of post World War l Germany but it continues to eat away at the value of the dollar.

 

[selmaborntidefan]

31T in debt shows how useless this 'debt ceiling' law is. In practice, it seems like all it does is give various sides an opportunity to posture and pretend that deficits/debt mean anything at all to them. I seriously doubt that this law has ever made any significant progress in reigning in any spending at all.
Why not repeal it?

Nothing has ever reigned in spending at all.
Nothing ever will.
About the only time you get actual defense spending cuts is when we go from doing wars in other countries and transition to peace.

We can blame the politicians but if they banded together and all 535 of them voted for a package of spending cuts in everything, the outrage from the voters would send all but those in the safest hardcore red or blue districts to the retirement line. "How can you cut money from old people on a fixed income when inflation is so bad?" and other variations on a theme.

 

[Tidewater]

31T in debt shows how useless this 'debt ceiling' law is. In practice, it seems like all it does is give various sides an opportunity to posture and pretend that deficits/debt mean anything at all to them. I seriously doubt that this law has ever made any significant progress in reigning in any spending at all.
Why not repeal it?

It does very little to limit increases in the debt because the lick-spittle media will dutifully tell the viewers that "politician X refuses to vote for an increase in the debt limit so the federal government can pay for wheelchairs for the disabled," or some other equally worthy goal.
The only utility is to get on record the politicians who voted to (eventually) kill the republic by voting for increasing the debt limit.
The day will come when the creditors refuse to buy any more federal debt, and that day will unleash world-historical movements that make the collapse of the western Roman empire look like a cakewalk in comparison. Every increase in the debt limit moves that day closer.
"But I feel fine."

 

[AWRTR]

Hasn't that already begun! Seriously QE by the Fed is the most egregious episode of printing money in our history. I suppose 8-10% inflation is mild in comparison to that of post World War l Germany but it continues to eat away at the value of the dollar.

You are absolutely correct that QE is a problem, but it is just the start. We are still the reserve currency and the strongest economy in the world by far. China is not doing well and will probably never recover from its Covid downturn. The Chinese population is in decline and will only accelerate that downturn. Manufacturing is going to leave as well, and no one else is close to us. When the US will reach a tipping point and fall off a cliff is anyone's guess. Maybe the ship can be turned around and it never happens, but with our leadership I won't hold my breath.

 

[crimsonaudio]

And the politicians keep raising it.

What personal responsibility? Just keep kicking the can down the road.

SMH

 

[Displaced Bama Fan]

Eventually, creditors will come to the conclusion that the US can never repay the money.
That day will be a world-historical moment.

What will be the impact of said creditors calling for repayment? Who are the top creditors percentage wise?

 

[UAH]

What will be the impact of said creditors calling for repayment? Who are the top creditors percentage wise?

The creditors have purchased treasury bonds principally China, Japan and Saudi Arabia. When they stop buying our debt we will be forced to pay a significantly higher interest rate to find buyers of our new issues. This is not good for either the debtor or creditor as rising interest rates will lower the value of the bonds previously issued.

 

[PaulD]

I want to clarify a distinction that is often missed. Raising the debt ceiling is not authorizing new spending. It is recognizing that spending already appropriated by Congress requires payments in excess of tax revenues. Not raising the debt ceiling has been likened to refusing to pay the credit card bill after you've run up the charges. (I generally dislike analogizing governmental budgeting to family household spending, but I'll make this exception.)

We are about the only country that has this artificial debt ceiling. For example, in the UK, by appropriating funds Parliament is held to authorize such borrowing as is necessary to deal with the amounts it appropriates.

The correct way to address the level of government borrowing is to limit appropriations and/or increase revenues.

 

[TIDE-HSV]

I want to clarify a distinction that is often missed. Raising the debt ceiling is not authorizing new spending. It is recognizing that spending already appropriated by Congress requires payments in excess of tax revenues. Not raising the debt ceiling has been likened to refusing to pay the credit card bill after you've run up the charges. (I generally dislike analogizing governmental budgeting to family household spending, but I'll make this exception.)

We are about the only country that has this artificial debt ceiling. For example, in the UK, by appropriating funds Parliament is held to authorize such borrowing as is necessary to deal with the amounts it appropriates.

The correct way to address the level of government borrowing is to limit appropriations and/or increase revenues.

Most congressmen understand this but take advantage of their constituents who don't...

 

[Tidewater]

What will be the impact of said creditors calling for repayment? Who are the top creditors percentage wise?

It is not a question of creditor ruining their own investments.
If the federal government was running a surplus, this would be going away on its own, but the federal government is running enormous deficits and financing that new debt is what is going to cause the collapse.

Look at it this way, if you purchase a house and finance it, the bank looks at your income (analogous to tax revenues of the federal government) and the amount you wish to finance (the federal debt) and makes a determination as to whether you are good for the money.
Finance a second house (the next year's federal deficit) and the lenders make the same calculations, but now the borrower already has some debt so the loan is a little riskier.
By the time you have financed your 5th (or 20th) house, the lenders are going to worry that they will not get their money back, so they cover that risk by setting their interest rates higher and higher. Given that the treasury refinances already-existing debt over time any increase in market interest rates means you pay more for the money you are borrowing today, but eventually, you will pay more for the money you borrowed decades ago. And the United States have been deficit spending since around 1833.
While a bank can foreclose on homeowner in default and at least get the property back, the purchaser of a T-bill is simply relying on the federal government to pay back the debt. The T-bill holder gets no collateral, so that loan is riskier, especially as the amount financed gets larger and larger.
Like the San Andreas fault and the Yellowstone caldera, it probably won't come today, and probably not tomorrow, but eventually and unavoidably and when it does, it will be catastrophic for millions. We cannot control when the San Andreas fault or the Yellowstone caldera, but we can avoid this collapse, but it would involve taxing a lot more and spending a lot less. The federal deficit was $1.4 trillion in FY 2022, so we need to spend $700 billion less and tax $700 billion more (or some combination thereof), just to break even, to stop making things worse. Does anyone sense an appetite for such cuts and tax increases on that scale?

 

[Displaced Bama Fan]

Learn Mandarin & Spanish.