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A grim possibility…

The United States of America is approaching a precipice predicted to arrive in mid-2023 — a possible default on US Obligations. 

“On December 16, 2021, lawmakers raised the debt limit by $2.5 trillion to a total of $31.4 trillion (Congressional Budget Office),” where the limit is currently set.

As of this writing in early April 2023, the impasse to raise the Federal Debt and the Statutory Limit (“Debt Ceiling”) between the President of the United States, Joe Biden (“President Biden”), and the Speaker of the House of Representatives, Kevin McCarthy (“Speaker McCarthy”), has kept the Treasury Department from fully meeting its obligations and at-risk of default should projections for tax collection or other assumptions not meet assumed levels. 

“On January 19, 2023, that limit [$31.4 trillion] was reached, and the Treasury announced a ‘debt issuance suspension period’ during which, under current law, it can take well-established `extraordinary measures` to borrow additional funds without breaching the debt ceiling (Congressional Budget Office).”

Please see here for a primer on the differences between debt and deficit by the Center on Budget and Policy Priorities. 

In the current rhetoric, President Biden published his budget that revealed his priorities for the country. He further requested Speaker McCarthy share the GOP’s version of a budget. President Biden has stated that he is willing to negotiate a budget with Speaker McCarthy. However, Speaker McCarthy has yet to produce an alternative to President Biden’s proposal. Further, Speaker McCarthy is demanding federal government spending cuts plus other items before the House GOP would possibly agree to increase the Debt Ceiling.  

It is common practice to increase the Debt Ceiling to accommodate additional debt to fund prior authorizations of Congress. President Biden has further asserted that he will negotiate the budget for the next fiscal year but will not negotiate over raising the Debt Ceiling.  

The House Freedom Caucus has proposed a budget. A tweet and a single-page PDF stretch the definition of a budget. So far, that is about all the information the Republican Party has shared. Speaker McCarthy has indicated that the House majority budget proposal will be later than the April deadline.

All the while time passes, the Treasury Department’s “extraordinary measures” continue to avoid default. As the USA travels toward ruin, each side seems to entrench its positions, and the middle ground is not being negotiated.  

With the above as the current state of politics, I have a dire vision of possible events that will doom the USA’s economy. These are not a roadmap but a chain of possible events looming on the horizon:

  •  Speaker McCarthy will need help creating a responsible budget proposal as the lawmakers have agreed not to cut Medicare, Social Security, and other third-rail programs or raise taxes. A feat some claim is not possible.  
  •  Speaker McCarthy will hold fast to demands to cut to already approved spending (conflating issues of debt and deficit)
  •  Speaker McCarthy and his party refuse to increase Debt Ceiling Authorization.
  • President Biden will refuse to negotiate over an increase to the Debt Ceiling Authorization.
  • A member of the House of Representatives will make a motion to vacate the Speaker at the most critical time for Debt Ceiling Authorization negotiations.  
  • As time passes, most House members may or may not vote to remove the Speaker. By this point, the Treasury Department’s ‘extraordinary measures’ limits will reach a breaking point.
  • While the Speaker’s office is unoccupied, the House can conduct no business.
  • While the House debates and votes, the USA defaults on its debts.

Albeit a dire prediction, the events are possible given the polarized political environment — many being the probable or likely outcome. This scenario is entirely avoidable and, I hope, outlandish.  

See you this summer. Please prove me wrong.

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Published by sigma

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