|Stop me if you have heard this story before… So the US government has hit their debt limit again ($31T this time).
Now used more as a tool of political posturing, the debt ceiling has been raised 70+ times since 1960. The same politicians playing this game of chicken, are the same politicians that approved the government’s planned spending for 2023 before the year even started. Taking a bit of drama out of the equation.
As you read this, the U.S. Treasury Department is slowing down payments to what it deems to be inessential areas, like contributions to government employee retirement plans. If the showdown intensifies threats might include interest and principal payments to government bondholders, Social Security benefits, & Medicare reimbursements which would have reverberations in the Stock Market and put in question the U.S.’s role as a global superpower.
The question becomes, why isn’t Congress focused on the actual budget and trying to reduce expenses to avoid getting into this problem again? Decrying government spending is easy, but telling voters exactly what you would take away from them is much harder. Currently for every $1.00 dollar of tax revenue, the government spends:
· 25¢ to Medicare & Healthcare
· 21¢ to Social Security
· 13¢ to Defense
· 7¢ to Veterans & Retirees
· 7¢ to Debt Servicing
The obvious here is that a default would make America’s long-term fiscal situation much worse. The elected officials who worry about the effects of simply walking away from the government’s obligations are being told to cave in to demands that have not even been articulated. The debt ceiling will eventually be raised again, much like the other 70+ times in history and take this news cycle as a “welcome back” reminder to the norm of Divided Politics.
USA Today did a follow-up piece with Sam Huszczo, CFA, CFP on Ford’s Pension in the Top Link below…
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