(C) Daily Montanan This story was originally published by Daily Montanan and is unaltered. . . . . . . . . . . Clearing up the confusion about the 'debt ceiling' – Daily Montanan [1] ['More From Author', 'February', 'Jim Smith'] Date: 2023-02-11 The new Republican leader of the U.S. House of Representatives, Kevin McCarthy is taking a stance on the issue of the “debt ceiling” which is both silly and dangerous. It is silly, because the “debt ceiling” is a cap on the amount of money the U.S. government can raise to pay bills that have already been incurred, not future spending. Congress passed laws and budgets in prior years that authorized this spending. Now that the invoices are coming in for these debts, the Treasury Department needs to pay them, or we will renege on our commitments, and that is when it becomes dangerous. If the U.S. government reneged on its debt commitment it would cause a financial collapse of the world economy worse than the Great Depression. As the leading economy of the world, what happens here would not just cause a ripple effect. It would be an economic tsunami that would wipe out economies all over the world. The collapse would wipe out almost all savings and investments, no matter what form (pensions, IRAs, stocks, bonds, real estate, etc.) they may be in. The collapse of the banking system would overwhelm the FDIC capability of insuring savings and checking accounts. A statutorily imposed debt ceiling has been in effect since 1917 when the U.S. Congress passed the Second Liberty Bond Act. Before 1917 there was no debt ceiling in force, but there were parliamentary procedural limitations on the amount of debt that could be issued by the government. The U.S. has raised its debt ceiling (in some form or other) at least 90 times in the 20th century. The debt ceiling was raised 74 times from March 1962 to May 2011, including 18 times under Ronald Reagan, eight times under Bill Clinton, seven times under George W. Bush, and five times under Barack Obama. Every few years Congress threatens to not raise the debt ceiling, using this threat as a way to try and gain political power. What is the national debt and to whom is it owed? The “national debt” is primarily held in one main way – U.S. Treasury securities. These can take many forms, from Treasury bills, notes and bonds. Treasury bills have maturities of a year or less. Treasury notes are issued with maturities from two to 10 years. Treasury bonds are long-term investments that have maturities of 10 to 30 years from their issue date. The U.S. Treasury issues securities to raise the money needed to operate the federal government. So these securities represent our “national debt.” Another name for this is the “U.S. Bond Market.” The U.S. public, which means us, holds more than $24.2 trillion of the national debt. Yes folks, Americans own 75% of the “national debt!” Twenty-five percent of the national debt, nearly $7.8 trillion of these past bills were incurred during Donald Trump’s presidency, the most of any presidency ever. So much for Trump’s much touted “fiscal conservatism.” So the Treasury needs to go out and sell more securities to raise the money to pay these bills, which politicians have labeled the “national debt.” By the way, none of this, the deficit, the bond market, the debt ceiling, and the national debt has little to do with inflation or the rise in the cost of any commodities. That’s just another red herring politicians drag out to scare the populace into believing that the government can’t help the average working family out. So don’t fall for it. Anyone who just looks at the current spate of enormous and unprecedented (and frankly obscene) profits being made by large corporations can see that the current inflation spike is caused primarily by corporate greed. So what’s the bottom line? If we really want to get rid of the national debt (that is, the bond market), which would be silly, all we have to do is to have the Treasury pay the notes off when they come due, which they have the ability to do. Most importantly, there is no “Doomsday” when you, your children, or your grandchildren, or anyone else will be handed a bill for your part of the national debt. That idea is a hoax. [END] --- [1] Url: https://dailymontanan.com/2023/02/11/clearing-up-the-confusion-about-the-debt-ceiling/ Published and (C) by Daily Montanan Content appears here under this condition or license: Creative Commons CC BY-NC-ND 4.0. via Magical.Fish Gopher News Feeds: gopher://magical.fish/1/feeds/news/montanan/