The market seems very nervous about the debt ceiling. A lot of selling this week is largely due to the deadlock of the debt ceiling discussion between the two parties. It seems to me that the market has a real concern that we may indeed see a unprecedented default if the debt ceiling is not raised by June 1.
Really? I think it is a stupidity to believe there will be a real default. How many times have we seen this political drama playing out every couple of years? Have you ever remembered that the debt ceiling was actually not raised by the deadline? It is purely a political game of chicken and at the end some sort of compromise will be reached by the two sides to happily raise the ceiling and the next cycle starts again.
It doesn’t take artificial intelligence to see that the debt ceiling crisis is a fraud. The government has plenty of money to pay for essential services – and to service the interest on its debt. As Ms. Yellen explained on TV on Sunday, it can “prioritize” its debts, paying those that are essential…and letting the others slide. No need for a ‘government shutdown’…no need for a ‘default.’ The ‘crisis’ is a swindle. Nothing more.
From former budget director (under Reagan), David Stockman, we get the figures. Every month the feds receive about $450 billion in tax receipts. The net interest payments on the debt are just over $60 billion per month. Social Security is $128 billion. That leaves $262 billion available for whatever foolish thing the feds want to spend it on. In fact, it leaves plenty to run the entire government in the style to which it became accustomed in 2019, which was no mean and lean year.
The debt ceiling fight is pure politics. The Democrats don’t want to make the hard choices that real budgets require. And the Republicans want to show that the Democrats are spendthrifts. Neither party really wants an actual limit on spending.
Bill Bonner
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