Debt Ceiling
The House passed a Budget deal on October 28, 2015 that, among other things, will extends the government’s borrowing authority through mid-March 2017. In 2013, the Republican-controlled House and the Democrat-controlled Senate negotiated with the White House on three fiscal matters with looming deadlines: raising the debt ceiling now approaching the limit $16.5T, massive federal spending cuts known as sequester and a budget resolution. On February 4th, the President signed a bill into law extending the debt limit debate until 5/18/13. This date may also get extended as far as August due to financial manipulations similar to those used in 2011. The "No Budget, No Pay Act of 2013" also mandates that pay for lawmakers be held in escrow starting April 16 until their chamber has passed a 2014 budget resolution. Congress must pass a spending bill, called a continuing resolution or “CR,” which would continue spending after Sept. 30, 2013, the end of the 2013 fiscal year. As it stands now, the government’s legal authority to borrow more money runs out in mid-October, 2013. According to the Bipartisan Policy Center, if that date arrived on October 18, the Treasury “would be about $106 billion short of paying all bills owed between October 18 and November 15. The congressionally mandated limit on federal borrowing is currently set at $16.7 trillion. The debt limit has been raised 13 times since 2001 and has grown from about 55 percent of Gross Domestic Product in 2001 to 102 percent of GDP last year. The hoped for legislation will raise the debt ceiling through Dec. 31, 2014.
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Fiscal Dominance- Servicing Debt

7/26/24
from Maudlin Economics,
7/24/24:

Why You Should Read: As John Mauldin keeps saying, federal debt is out of control and headed toward crisis. This report from Michael Lebowitz at RIA Advice explains how the Federal Reserve helps sustain the debt and plans to keep doing so. This may come at the expense of its traditional employment and inflation mandates. Key Points: “Fiscal dominance” happens when debt becomes so large the central bank must help it be serviced cost-effectively. One way the Fed does this is by keeping real interest rates negative, as has been the rule for years now. The government added $2.5T in debt over the last four quarters, of which over $1T went toward interest expenses. The Treasury’s average rate is rising as lower-rate debt matures so the cost will rise substantially more, even without adding new debt. In addition to controlling rates, the Fed also incentivizes banks to buy large amounts of Treasury debt. Bottom Line: Fiscal dominance fuels the already-widening wealth gap by propelling stock and other asset prices higher. The reduces consumer and business confidence, generates economic headwinds and may lead to social unrest. Lebowitz concludes we can still reverse this trend but are running out of time. -Patrick Watson

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