Dems Need to Spend More of Your Money: Debt Ceiling and Default Explained

zimmytws / shutterstock.com
zimmytws / shutterstock.com

In January of 2023, America once again hit its debt ceiling, and the unwillingness of President Biden to negotiate a new one is yet another preventable crisis he refuses to own.

The debt ceiling is a limit Congress sets on the amount of debt the U.S. government can incur by law. It is a cap on the money the government can borrow to finance its operations, pay for government programs, and service its outstanding debt, including Treasury bonds, bills, and notes.

The U.S. government borrows money by issuing Treasury securities, which various investors buy, including individuals, banks, pension funds, insurance companies, foreign governments, and other entities.

Foreign governments, such as China and Japan, are the largest buyers of U.S. Treasury securities, which hold significant amounts of U.S. debt. The U.S. government also borrows from domestic investors, such as mutual funds, banks, and insurance companies.

The Federal Reserve, the central bank of the United States, also holds a significant amount of U.S. debt, which it acquired through its quantitative easing program in response to the 2008 financial crisis.

Raising the debt ceiling allows the U.S. government to continue borrowing money to fund its operations and pay its bills, including payments on outstanding debts such as Treasury bonds, bills, and notes. Doing so helps ensure that the government can meet its financial obligations and avoid a potential default on its debt, which could have severe consequences for the U.S. economy and financial markets.

If the debt ceiling is not raised, the government may be unable to borrow enough funds to meet its financial obligations, such as paying for Social Security, Medicare, and other government programs. It may also be unable to pay the interest on its outstanding debt, which could lead to a default on its debt obligations.

A default could cause significant disruptions in financial markets, lead to higher borrowing costs for the government, businesses, and individuals, and harm the government’s credit rating. It could also lead to cuts in government programs and services, adversely affecting individuals who rely on these programs.

Foreign countries, including those that hold U.S. debt, would also likely be negatively affected by a U.S. default, as it could cause a global financial crisis and destabilize the international monetary system. In addition, holders of U.S. Treasury securities, such as banks, insurance companies, pension funds, and individual investors, would see the value of their holdings decline, potentially causing significant losses.

A default would harm the U.S. government’s ability to borrow in the future, potentially making it more difficult and expensive to finance government programs and operations. This could lead to cuts in government services, reduced economic growth, and increased financial instability.

In other words, it’s just another day for Democrats.

Republicans have passed legislation allowing the debt ceiling to be raised but included common-sense spending cuts to rein in and out-of-control government spending. Biden refuses to negotiate a compromise on raising the debt ceiling because Democrats want to continue to spend money they don’t have on pet projects no one cares about, unhindered by accountability or responsibility.

Biden is taking a firm stance on the debt ceiling, adamantly refusing to release any ability to spend money unchecked. This is equivalent to declaring bankruptcy while purchasing a luxury car for average U.S. citizens.

Republicans understand that fiscal responsibility starts with limiting the amount of money unnecessarily spent on projects without benefit for Americans, such as funding the war in Ukraine. Meanwhile, Democrats act like teenagers with their mother’s credit cards and no supervision.

Republicans are expected to cave to keep America solvent, and Biden will continue to fund Democratic spending sprees with taxpayer dollars.

Democrats play with the word “trillions” as if it isn’t an actual number. Here’s hoping that we can oust the party of tax and spend before they discover “quadrillion.”