US Debt Shenanigans About To Start

James Doogue

The US Government has a current legislated debt ceiling of US$31.4.

As of January 4, 2023, the U.S. Treasury’s official figure for the debt of the federal government was $31,375,549,251 ,149.

This equates to:

- $93,870 for every person living in the U.S. But more importantly.

- $239,139 for every household in the U.S

- That's 66% more than the combined consumer debt of every household in the U.S.

- and 6.4 times annual federal revenues.

- a massive 125% of annual U.S. economic output (GDP)

Without permission to borrow more money the government will be required to shut down all but essential services.

The debt ceiling has been increased by a massive $9.5 trillion since Joe Biden's election to cover structural growing expenditure plus omnibus Bills such as the Covid Recovery Act, The Infrastructure Bill and the Inflation Reduction Act. All massive Democrat boondoggle, crony wish-list list, and left wing spending which had little to do with the title of the omnibus spending Bills.

The Republicans have said they will not automatically pass debt ceiling increases, but they won't want to shut government down either. They just want the debt ceiling increase come an annual expenditure budget they can agree on.

If let's say Congress couldn't agree to increase the spending bill, then these are the likely options of action.

1. AUSTERITY.
Refuse to increase the debt ceiling. This would require decisive action to reduce government expenditure, and increase taxes immediately and dramatically. It has to be sufficient to ensure the net difference between expenses and tax receipts is sufficient to pay all expenses, including interest on borrowings. In addition, the sale of some government held assets could be used to pay back some debt. It's also possible that legislation could give the state authority to reduce welfare payments and pensions paid to Federal government retirees, and maybe even to dip into the bank deposits which don't carry a 100% government guarantee.

This would be considered an austerity approach which will often result in a recession, because of reduced spending in the economy. Increased unemployment, and declining stock and property values would also result before the economy would adjust.

Given employers can't find enough staff, especially for entry level manual positions currently, loosening the labour market could be a good thing in the longer term. Reduced economic growth will have a dampening on price and wage inflation. But in the short term it will be economically ugly.

2. DEFAULT.
The US could essentially default on paying out bonds and notes issued or more likely negotiate with note and bond holders to repay a smaller amount and at a lower interest rate. This will infuriate the creditors and make it more difficult to sell new debt to raise funds to meet debts coming due.

3. SUSPEND DEBT LIMIT.
This strategy authorises borrowing for a certain amount to meet specific ecpenses only. Such expenses as deemed critical. The short term suspension of the Debt Limit, gives the House time for an overall debt ceiling agreement approach to be approved and implemented.

4. Increase the Debt Limit.
This is to cater for anticipated increase in borrowing needs and to meet interest on debt deal. An expectation of a balanced budget with excess to reduce the debt over time would be required.

5. Short Term Debt Ceiling Increase. Before going for either of options 1 to 4, or a combination of those options, it's likely there is a lot to work out between diametrically opposed politicians.To allow for all parties to vote in the majority for the preferred option. And for that option to be put in place.

Republicans will eventually pass a bill to increase the Dept Ceiling, but they will only do that if Republicans can achieve some wins in negotiations.They will look for the bill to include:

- A commitment to reducing spending to help to eventually reduce and pay all debt.

- A commitment to certain new taxes or tax increases if that is the strategy to help reduce debt.

- Improve taxation and collection methods

We'll soon see how serious the new speaker Kevin McCarthy is to operate a fair Congress which will hold the government to account.

What A Shutdown Looks Like

Until the new debt ceiling is agreed, we risk having government shutdowns. So I thought I would look at how the shutdown went the last time.

In January 2019 we were in a debt ceiling being held up and a government shutdown in place.

Social Security, Medicare, and Medicaid are set to keep functioning.

Lawmakers arrive to the House chamber to vote to fund the federal government on January 22, 2018, in Washington, DC.

It’s officially day 29 of the longest government shutdown ever — and its effects are becoming increasingly apparent.

The December 21 deadline for funding a portion of the government, including the State Department, the Justice Department, the Transportation Department, the Agriculture Department, and the Department of the Interior, has long come and gone — and lawmakers are still trying to figure out some kind of deal. (Other agencies have already been fully funded, including the Department of Health and Human Services.)

As things stand, Congress still needs to pass seven spending bills, including the contentious Homeland Security appropriations bill, which governs funding for border security and a potential wall.

Because many agencies have already been funded, only about a quarter of the government is affected, unlike previous wholesale shutdowns in January 2018 and October 2013. Still, hundreds of thousands of employees have been furloughed and will likely receive back pay after the fact. Some services have already come to a halt, and even more are due to be cut back.

Congress has approved measures to insulate the impact on the city in the event of a shutdown.
What could be affected by a partial shutdown
Every agency has its own contingency plan set up in case of a shutdown, and there are a couple bodies including the IRS and National Parks that could see some pauses or breaks in service. Additionally, as MarketWatch points out, the president has the ability to determine whether any service is "essential” or not — so it’s possible he could try to shut down a key government function like air traffic control if he really wanted to make a point.

National parks
National parks — which are funded as part of the Interior Department — have long been one of the most visible government entities affected by a shutdown and many will remain open.
Much like during last January’s shutdown, a number of national parks are still accessible to visitors, but they will have limited staffing and closed access to various park facilities, including restrooms. As worries about trash and conservation at many sites pile up, the

National Park Service will use entrance fees to cover the costs of some services at its popular locations, The Washington Post reports.
Visitors are able to look up and check the status of different national parks at the national park index, here.

Museums
The Smithsonian had been operating its museums and the National Zoo using reserve funds from previous years, but it has announced that it will be closing them starting Jan. 2.

As Vox’s Julie Belluz reports, the FDA said this week that it’s missed about a few dozen food inspections out of more than 8,000 it conducts. It notes, however, that the inspections of "high-risk” food facilities, which handle things like raw meat are due to resume shortly, while inspections of "low-risk” facilities that handle items like cookies and crackers will be put on pause.

Tim adds:

One wonders where all this money went. I rather suspect it went to the Democrats so they could win elections, or not get blown out. The Dems had ten times the warchests as Republicans in the last election, for example. I suspect a lot of that came from taxpayers. BTW the GOP could win those government shutdowns if they would just stand their ground. They always panic and blink first and then are worse for having done it.

Posted by: Timothy Birdnow at 12:05 PM | Comments (7) | Add Comment
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