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.

'The negative economic effects of excessive debt.'

from Over My Shoulder ,
Lacy Hunt continues documenting the negative economic effects of excessive debt. In this quarter’s Hoisington outlook, he describes how extreme monetary and fiscal policies are combining to push the economy toward contraction. Key Points:
  • Higher deficit spending is reinforcing the contractionary influence of monetary restraint.
  • The fiscal imbalance may not be reversible since, for the first time since World War II, economic growth hasn’t slowed it.
  • Moreover, neither political party is offering a plan to address budget deficits that are set to keep growing.
  • The monetary surge of 2020-2021 accelerated inflation, and the monetary restraint needed to control that inflation is reducing living standards.
  • The dis-saving of the federal budget deficit now exceeds household, corporate and foreign saving, resulting in negative net national savings.
  • As the budget deficit mounts, its benefits will be increasingly brief while longer-term negative effects grow more pronounced.
Bottom Line: Lacy Hunt’s outlook may look odd with an economy seemingly in good shape. Think of it as a kind of slow erosion inside a giant dam. Everything seems fine… until one day, it’s not. More From Over My Shoulder :

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