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Raising the Debt Ceiling
It seems to be that season again! Many hardworking Americans are caught in the financial debates between the Left and the Right regarding the debt ceiling, jeopardizing the economy.
How did we get here? Why does this keep happening?
In the edition of Finessing Finance, we are taking a deeper dive into how Americans can potentially worry over their representatives in D.C.
Let us investigate why the United States continues to raise the debt ceiling.
The History of the Debt Ceiling
One of the most important pieces of news from this past January was Janet Yellen's, the Secretary of the U.S. Treasury, comment on the nation reaching our debt limit. Yellen predicted the U.S. would default on debts as soon as June 2023.
June is rapidly approaching, and the U.S. has not yet agreed on whether the debt ceiling should be raised.
The U.S. is one of the only developed countries in need of raising their debt ceiling every few years. The debt ceiling has been raised 74 times since 1962. This is in part due to the passing of the Second Liberty Bond Act in 1917.
Before this Act, the U.S. Treasury needed specific approval from Congress to issue bonds and incur national debt. The Act sped up the process for the U.S. Treasury for an influx of additional revenue while a cap was placed on the amount of debt. Now the Treasury has to go to bat every time we get close to the ceiling. If Congress is unable to raise the ceiling, the U.S. will default on all debt. Talk about the bottom of the 9th here.
Read more about the debt ceiling here.
What’s Happening Now
The House and the Senate must both come into agreement on raising the debt ceiling if we want to continue running the country.
As of Thursday, Speaker of the House, Ryan McCarthy has voiced that President Biden and Congress are closing in on an agreement. This news sent the stock market soaring. On Friday (and at the time of this writing), negotiations had paused. All parties are leveraging this in their favor which stalls out an agreement as parties continually review new terms.
If you are seeing your stock portfolio jump, zigzag, and go sideways this week it’s due to the negotiations.
For now, let’s cross our fingers that our trusted officials can work out a deal.
Have a great week,
Jordan