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The Debt Ceiling is Trump's Economic Test
Registered User
User ID: 411409
04-21-2017 03:50 AM

Posts: 9,723

Post: #1
The Debt Ceiling is Trump's Economic Test

On Wednesday, the temporary suspension of the debt ceiling ended, and so now the federal government is not going to be able to go into any more debt until the debt ceiling is raised. For the moment, the Trump administration can implement “emergency measures” to stay under the debt limit, but it won’t be too long before we get to a major crisis point because the federal government is quickly running out of cash. Already, the U.S. Treasury has less cash on hand than Apple or Google, and that cash balance is going to keep on dropping until the debt ceiling is finally lifted.

You may remember that the debt ceiling became a major issue a couple of times during the Obama years. Last time around, Barack Obama and the Republicans in Congress agreed to a horrendous deal which suspended the debt ceiling until several months after the 2016 election…

Since President Barack Obama signed the “Bipartisan Budget Act” on Nov. 2, 2015 there had been no legal limit on the amount of money the federal government could borrow until now. That law included a section entitled “Temporary Extension of Public Debt Limit.” It said that the law imposing a limit on the federal debt “shall not apply for the period beginning on the date of the enactment of this Act and ending on March 15, 2017.”
During the 16 and a half months between the signing of that deal and today, the U.S. national debt rose by a whopping $1,414,397,000,000.

But now the U.S. national debt will not be allowed to rise by another penny until the debt ceiling is raised or suspended once again.

The Trump administration is pushing hard to get the debt ceiling raised, and this is a complete reversal from how Donald Trump felt about the debt ceiling back in 2013. The following comes from the L.A. Times…

Trump sided with hard-liners in 2013, publicly opposing an increase. “I cannot believe the Republicans are extending the debt ceiling — I am a Republican & I am embarrassed!” he tweeted then.
Trump was actually right about the debt ceiling in 2013, and he is wrong now.

We simply cannot afford to keep adding trillions of dollars to the national debt. What we are doing to future generations of Americans is beyond criminal, because we are literally destroying their future just so that we can enjoy an inflated standard of living that we do not deserve today.

Treasury Secretary Steven Mnuchin has already begun to implement “extraordinary measures” to keep us under the debt ceiling. The first step that was taken was the suspension of the sale of SLGS securities…

“Today,” Mnuchin wrote, “Treasury is announcing that it will suspend the sale of State and Local Government Series (SLGS) securities. SLGS are special-purpose Treasury securities issued to states and municipalities to assist them in conforming to certain tax rules. These securities count against the debt limit. The suspension of SLGS sales will commence on March 15, 2017, and continue until the debt limit is either raised or suspended. As in the past, it is likely Treasury will utilize additional extraordinary measures.”
The federal government will be able to keep going for a little while by implementing such “extraordinary measures”, but the Treasury cash balance is going to continue to dwindle and at some point a major squeeze is going to happen.

The dollar continued to climb against the yen Thursday afternoon after Treasury Secretary Steven Mnuchin affirmed that there’s bipartisan support for raising the U.S. debt ceiling, and that an extension would likely be approved by the summer.

The greenback USDJPY, -0.09% advanced to ¥109.48 on his comments, compared with ¥108.86 late Wednesday in New York.

Investors have grown increasingly anxious since the U.S. reached the limits of its legal authority to borrow back in March, worrying that the same fractiousness that prevented President Donald Trump from passing his plan to repeal and replace Obamacare might also stymie a debt-ceiling accord, said Alfonso Esparza, senior currency analyst at Oanda.

“With a Republican president majority, it had seemed like a slam dunk,” Esparza said. “Yet after the health-care reform fiasco, some questions began to emerge.”

President Trump’s budget director said Thursday that Republicans might work to raise the debt ceiling using a budget process that prevents Senate filibusters on controversial additions.

Office of Management and Budget Director Mick Mulvaney said the White House is “looking at options” to raise the legal limit of how much the debt the federal government can hold. The ceiling and will likely need to be raised by autumn to avoid a default.

“We are not Greece, and the comparisons to Greece are entirely unfounded,” Mulvaney said, referring to the Mediterranean nation's ongoing economic depression. "But I think there are some lessons to be learned about overextending yourself on debt.”

Democrats and Republicans have both vowed to raise the debt ceiling before a default, and Mulvaney said he would press for “more fiscal discipline” in any deal.

He said Republicans could try to use a legislative process called budget reconciliation to circumvent filibusters, meaning cost-cutting measures opposed by Democrats would need only simple majority approval from the Republicans in each chamber.
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Registered User
User ID: 397519
04-21-2017 03:57 AM

Posts: 4,908

Post: #2
RE: The Debt Ceiling is Trump's Economic Test
Good Topic OP, I think this time around Trump will just get rid of the whole thing by executive order. Many economists were complaining the last time they raised the ceiling that it was an antiquated, useless policy.

So, he'll probably just eliminate it completely with an EO. He's got to deficit spend at least $2.5 trillion a year every year he's in office to keep the debt machine rolling.

“It's easier to fool people than to convince them that they have been fooled.” - Mark Twain
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