A VERY short TGIF 2 Minutes today.
Recent news features the danger of the United States defaulting on its Treasury debt. Longer story short, the US Treasury is very, very, very, very unlikely to default, and “cooler minds” would be educating the American public about why this is the case. The explanation is beyond the scope of TGIF 2 Minutes. (Please note that none of the following is a political statement or meant to be.)
Of course, there are plenty of reasons why the US finds itself, once again, in this position. The last time it was this serious was in 2011 when Barack Obama was President. Then came the coronavirus in 2019 and responses by Presidents Trump and Biden. Entitlements and social program spending, along with eventually replenishing US defense spending, became and are still beyond expensive. As The Wall Street Journal notes, “…U.S. debt held by the public is now about 100% of GDP, up from 39.2% as recently as 2008 and 77.6% in 2018” and “…The cost of financing that debt is rising fast along with interest rates, and interest on the debt will take up an increasingly large share of federal revenue. Priorities… will be squeezed.”*
The country is witnessing a high stakes political fight that will likely play out over the next five months and feature the Republicans and Democrats in the US House of Representatives negotiating and attempting to call “chicken” on who gives in first, with trillions of dollars in the offing. The primary matters at hand are the government’s overdue and needed discipline on its spending cap – and determining how much debt is manageable for the country over the short- and long-term. The next generation of Americans, among others,is who should be watching most closely.
*WSJ.com, Editorial Board; 1/16/2023.