Don’t debtonate: The US debt ceiling deadline ends tomorrow
The US may be hitting the debt ceiling tomorrow, and that doesn’t look good for its economy at all. As a country, the US runs budget deficits, as most countries do. Which means that the government spends more money than its revenue through taxes and other sources.?
The debt limit or the debt ceiling is the maximum amount of money that the federal government is allowed to borrow in order to meet its obligations, such as funding social net programs, salaries for troops, and interest on the national debt.?
Last week, Treasury Secretary Janet L. Yellen warned that the US is most likely to hit its $31.4 trillion debt limit on January 19. While the US Treasury can launch extraordinary cash management measures to avoid default, this can only last until June.?
Congress needs to increase the debt limit in time to avoid an economic shock. This is tricky business because there has always been a standoff between the Democrats and the Republicans over government spending and the debt ceiling.?
In the past, every time the country has been close to hitting the ceiling, it has triggered sharp volatility in the stock market, sent up mortgage prices, made borrowing expensive for companies, and hurt consumer confidence.?
A debt limit breach would greatly hurt the economy - it would kill up to three million jobs, add $130,000 to the cost of an average 30-year mortgage, and balloon the national debt by another $850 billion, according to experts.
So what do you think – will the US be able to pay its bills? Let us know in the comments.