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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Debt Catharsis

10/28/23
by John Maudlin,
from Maudlin Economics,
10/27/23:

Our modern-day debt situation is a kind of Greek tragedy. A dramatic tension is certainly building. The debt supercycle theory ... changed after 2008 when focus shifted from the private sector to government. On one level, delay is good. It gives us more time to prepare. The problem is “a few more years” will bring us to the late 2020s/early 2030s when the other cycles we’ve discussed (especially Neil Howe’s Fourth Turning but all the others as well) will be near their peaks, intensifying the pain. Now, we could avoid that by getting the government debt under control sooner. That’s extremely difficult, though.

The CBO projects that the (currently depleting) Social Security “Trust Fund” will be empty as of 2033. Some analysts say much sooner. Under current law, benefits would then fall to whatever payroll tax revenue allows and everybody (I assume) would get a pro rata cut. The next graph shows what Treasury thinks that will look like.

My final compromise—and that’s very much what it is—would reduce the debt to 89% of GDP in 2033 and 59% in 2050. Some highlights: Raise gasoline tax 15 cents per gallon, then index it to inflation. Limit defense and non-defense spending growth to 1%. Raise Social Security full retirement age to 70 for workers born in 1978 or after. Raise the payroll tax rate by 1%. Subject earnings over $250,000 to payroll tax (This is truly draconian. And a very bad choice. I prefer consumption taxes!) Means-test benefits for high-earning seniors. Increase Medicare premiums for all beneficiaries. Eliminate farm subsidies. Raise capital gains and dividend taxes. Eliminate mortgage and state/local tax deductions. Limit charitable donation deduction. 4% tax on corporate share buybacks. 5% national VAT tax. I also included some provisions that actually raise spending or reduce taxes, since that would likely be necessary to gain enough support. Tighten border security and build a border wall. Extend 2017 tax cuts only for taxpayers earning less than $400,000. To be clear, I don’t like much of this plan.

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