Rick Newman, Wed, August 4, 2021

You’ll be hearing a lot about the debt ceiling in coming weeks. Tune it out. Learn something useful about real ceilings, instead. You won’t, but it will still be time better spent than worrying about the debt ceiling.

Still here? Well, then. You can’t quit the debt ceiling. You’re not alone. There’s a strange call to drama about the debt ceiling. Everybody knows how it will end, yet some people enjoy the show anyway, like an episode of "Curb Your Enthusiasm" where you know Larry is going to debase himself, because that’s what always happens. In this instance, Congress is going to debase itself, because that’s what always happens. You know the ending.

Before we get to the ending, here’s what is coming next. The federal government has reached the legal limit of its ability to borrow money, which every few years triggers a few months of fake drama about what might happen if Washington actually defaulted on some of its obligations. If the U.S. government ever defaulted on debt payments, it would wreck global financial markets and cause not a recession, but a 1930s-style depression. That would be an entirely man-made disaster with mobs coming for the politicians responsible. The politicians might be that venal, but they can’t bear to shoulder the blame for mass starvation. So they always avert a disaster that was never going to happen anyway, like stunt drivers in a video game.

The U.S. Treasury ought to be able to borrow as much money as it needs to finance the spending Congress itself has authorized. But it needs periodic approval from Congress when the total amount of borrowing goes up, as it has been for the last 20 years. This requirement dates to 1917 and might make sense if there were legitimate concern in Congress about running up too much debt. You know where this is going: Nobody cares about the debt, because it turns out modern finance allows governments to essentially hand out free money, with no penalty except that voters might get rowdy if they feel somebody else is getting more free money than they are.

Republicans handed out free money when they passed the Trump tax cuts of 2017. President Trump and other Republican leaders lied about the miraculous “supply-side” growth that the tax cuts would trigger. There was no miracle, no notable growth spurt, as researchers at the Brookings Institution have thoroughly demonstrated. But those tax cuts will add about $1.5 trillion to the national debt—money that is mostly transferred from future taxpayers to wealthy Americans today.

Biden and his fellow Democrats figure that if Republicans take on federal debt to hand out money to their favored constituents, well, they should too. Biden wants to make permanent an advanceable child tax credit that puts borrowed money into middle- and working-class bank accounts. Biden has many other plans that would add between $1 trillion and $3 trillion to the national debt. He claims much of his agenda would be paid for, but if Congress manages to pass it, watch for budget gimmicks that would lead to a lot more borrowing than Biden wants to admit.

How much debt does America owe to investors, anyway? $22.3 trillion. What if you include debt the government owes itself? Then it’s $28.4 trillion. Is that a lot of money? It’s an unfathomable amount. Is America broke? No. Why not? Because it can always raise taxes and print money. That much money? Yes. Would it be easy to raise that much money? Not all at once, but there’s no likely scenario where the government would have to pay it all back at once. Those are 10-year and 30-year securities and so on. Will there be a debt crisis? Nobody knows.

What about the debt ceiling? Oh, right. Here’s what's going to happen for the next three months. The Treasury Department will invoke “extraordinary measures” to come up with the money needed to pay for everything until roughly early November, which is when the money will really run out. Everybody playing this game knows when the real deadline is. Members of Congress and senior Biden administration officials will make many stern statements about the importance of Congress extending the borrowing limit for a few more years. There will be scary-sounding explainers about how Social Security checks won’t go out and bridges will fall down and airplanes will crash if Congress doesn’t extend the debt limit. The sky will be falling, theoretically.

Financial markets will take it all in stride, because disaster has never struck before. “This is one of the most maddening issues in Washington, an irritant for the markets that always gets resolved at the very last minute,” says Greg Valliere, chief US policy strategist at AGF Investments. “The debt ceiling always gets raised, and it will be raised again late this fall.” If financial markets did start to panic about the possibility of the U.S. government defaulting on its debts, lawmakers would run to their respective chambers and pass the fastest debt-ceiling increase in U.S. history.

Rick Newman, Wed, August 4, 2021

You’ll be hearing a lot about the debt ceiling in coming weeks. Tune it out. Learn something useful about real ceilings, instead. You won’t, but it will still be time better spent than worrying about the debt ceiling.

Still here? Well, then. You can’t quit the debt ceiling. You’re not alone. There’s a strange call to drama about the debt ceiling. Everybody knows how it will end, yet some people enjoy the show anyway, like an episode of "Curb Your Enthusiasm" where you know Larry is going to debase himself, because that’s what always happens. In this instance, Congress is going to debase itself, because that’s what always happens. You know the ending.

Before we get to the ending, here’s what is coming next. The federal government has reached the legal limit of its ability to borrow money, which every few years triggers a few months of fake drama about what might happen if Washington actually defaulted on some of its obligations. If the U.S. government ever defaulted on debt payments, it would wreck global financial markets and cause not a recession, but a 1930s-style depression. That would be an entirely man-made disaster with mobs coming for the politicians responsible. The politicians might be that venal, but they can’t bear to shoulder the blame for mass starvation. So they always avert a disaster that was never going to happen anyway, like stunt drivers in a video game.

The U.S. Treasury ought to be able to borrow as much money as it needs to finance the spending Congress itself has authorized. But it needs periodic approval from Congress when the total amount of borrowing goes up, as it has been for the last 20 years. This requirement dates to 1917 and might make sense if there were legitimate concern in Congress about running up too much debt. You know where this is going: Nobody cares about the debt, because it turns out modern finance allows governments to essentially hand out free money, with no penalty except that voters might get rowdy if they feel somebody else is getting more free money than they are.

Republicans handed out free money when they passed the Trump tax cuts of 2017. President Trump and other Republican leaders lied about the miraculous “supply-side” growth that the tax cuts would trigger. There was no miracle, no notable growth spurt, as researchers at the Brookings Institution have thoroughly demonstrated. But those tax cuts will add about $1.5 trillion to the national debt—money that is mostly transferred from future taxpayers to wealthy Americans today.

Biden and his fellow Democrats figure that if Republicans take on federal debt to hand out money to their favored constituents, well, they should too. Biden wants to make permanent an advanceable child tax credit that puts borrowed money into middle- and working-class bank accounts. Biden has many other plans that would add between $1 trillion and $3 trillion to the national debt. He claims much of his agenda would be paid for, but if Congress manages to pass it, watch for budget gimmicks that would lead to a lot more borrowing than Biden wants to admit.

How much debt does America owe to investors, anyway? $22.3 trillion. What if you include debt the government owes itself? Then it’s $28.4 trillion. Is that a lot of money? It’s an unfathomable amount. Is America broke? No. Why not? Because it can always raise taxes and print money. That much money? Yes. Would it be easy to raise that much money? Not all at once, but there’s no likely scenario where the government would have to pay it all back at once. Those are 10-year and 30-year securities and so on. Will there be a debt crisis? Nobody knows.

What about the debt ceiling? Oh, right. Here’s what's going to happen for the next three months. The Treasury Department will invoke “extraordinary measures” to come up with the money needed to pay for everything until roughly early November, which is when the money will really run out. Everybody playing this game knows when the real deadline is. Members of Congress and senior Biden administration officials will make many stern statements about the importance of Congress extending the borrowing limit for a few more years. There will be scary-sounding explainers about how Social Security checks won’t go out and bridges will fall down and airplanes will crash if Congress doesn’t extend the debt limit. The sky will be falling, theoretically.

Financial markets will take it all in stride, because disaster has never struck before. “This is one of the most maddening issues in Washington, an irritant for the markets that always gets resolved at the very last minute,” says Greg Valliere, chief US policy strategist at AGF Investments. “The debt ceiling always gets raised, and it will be raised again late this fall.” If financial markets did start to panic about the possibility of the U.S. government defaulting on its debts, lawmakers would run to their respective chambers and pass the fastest debt-ceiling increase in U.S. history.

What is it called when taxes are paid selectively ?
Without spending there would be no revenue.
Government spending on contracts results in more people working ,a wider range of people paying taxes. This is different from China making everything we need.
So, from this aspect free college spending would create higher revenues from higher paying jobs. This investment money is different from outright spending .
Government s job is to spend money.
This is unlike you and your checkbook . Where your goal for your checkbook is to spend less money any way you can.
The government is not the enemy. They get a return on the money they spend unlike you and what you spend.