Broker Check

Debt Ceiling

January 23, 2023


I hope all is well.

I’m sure many of you have seen the headlines “US officially hits debt ceiling”. 

I want to share a little perspective with you.

  1. Yes the country has hit its current debt ceiling.  This is not a 1st.  The US debt ceiling was instituted in 1917.  It has been raised some 90 times since then.  The debt ceiling was raised 74 times from March 1962 to July 2021, including 18 times under Ronald Reagan, 8 times under Bill Clinton, 7 times under George W. Bush, 5 times under Barack Obama and 3 times under Donald Trump.
  2. Hitting the debt ceiling does not cause any immediate problems.  The government has “tools” they can use to continue to fund government operations and make payments like social security, for a period of time.
  3. If the debt ceiling is not increased before these “tools” run their course, the government will need to be shut down. 
  4. Eventually payments like social security will be suspended.  Lastly, interest on government bonds would not be paid, causing a default.
  5. While political brinksmanship has taken us right to the 11th hour many times, the debt ceiling has been increased generally with bipartisan support.
  6. There has never been a time when the debt ceiling was not increased.

So where are we now? 

The government is using their “tools”.   The estimate is that will last until early June 2023.  I am hopeful that pragmatic, moderate members of both political parties will get the debt ceiling either raised or suspended before that deadline.  I don’t expect any negative impact to financial markets unless and until we get to mid/late May with no resolution.  As such we are not making any changes specifically around this issue at the moment.  We will monitor the situation as it evolves and take appropriate action as needed.

I hope this helps with any questions or concerns.  Feel free to call if you want to discuss further.


Sources: Investopedia


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