Broker Check

Debt Ceiling

January 23, 2023
Share |

Folks,

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

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.