There is a lot of talk about the U.S. debt ceiling these days. The debt ceiling is a legislative limit on the amount of money the U.S. Government can borrow to meet its existing obligations. It was created in 1917, during World War I, when Congress passed the Second Liberty Bond Act and restricted total federal debt. The current debt limit is just under $31.4 trillion as you will see below.

The U.S. is now taking “extraordinary measures” to avoid going over the limit. In short, the U.S. Government is prioritizing debt payments and delaying “less critical payments” (such as contributions to government pension funds). It’s estimated these measures will be exhausted by June. In addition, there is a relatively high cash balance in the Treasury General Account, and tax receipts will also add to the size of the account. This will likely allow the government to operate through August, and possibly until October without an increase to the debt ceiling. However, the Republican party has vowed to work towards a deal to raise the U.S. debt ceiling in order to prevent a possible debt default. 

Here is my take… yes, the U.S. will eventually get this version of the debt ceiling debate all figured out - but it will likely be a “push and pull” exercise between political parties that will go right down to the wire. This excites the media as this will provide sensationalist headlines for slow news days, so please do not let the negative news stories on this topic worry you one little bit.

Congress has raised the debt ceiling 86 times since 1960 — 36 times under Democratic presidents and 50 times under Republican presidents. By raising the debt ceiling, Congress would be voting for an increase to cover spending that has already been approved. That’s right, the spending has already been approved. In Alberta, we call that closing the barn door after the horse has left the barn.

Our friends in the U.S. (and in Ottawa for that matter) should start by balancing budgets. It is simple math… spend less than you earn. You are creating an unrealistic debt issue for future generations.

We will let the U.S. politicians play their little cat and mouse game. I truly believe that the debt ceiling debate will be just fine and, in my opinion, it is the bigger issue of a dramatically increasing national debt that should be front and centre instead.  - Brad