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Visualizing the debt ceiling


 

This via Bloomberg. (Note: On the top right corner, the green light representing U.S. debt held by the public is crossing the red line representing the legislated debt limit, but that wasn’t a default. In February of this year Congress suspended the debt ceiling until May 18. On May 19 a new limit was set to $16.699 trillion. If the green line crossed the red line in the next few days, though, it will constitute default.)


 
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Visualizing the debt ceiling

  1. You say:

    “If the green line crossed the red line in the next few days, though, it will constitute default.”

    You don’t know the meaning of the word “default”.

    • Maybe Moody’s can help you understand.

      http://www.washingtonpost.com/blogs/post-politics-live/liveblog/live-updates-the-shutdown-4/?hpid=z2#c1e3ada3-dc00-41d8-92cb-327c5c814d82


      ” We believe the government would continue to pay interest and principal
      on its debt even in the event that the debt limit is not raised,
      leaving its creditworthiness intact,” the memo says. “The debt limit
      restricts government expenditures to the amount of its incoming
      revenues; it does not prohibit the government from servicing its debt.
      There is no direct connection between the debt limit (actually the
      exhaustion of the Treasury’s extraordinary measures to raise funds) and a
      default.

      • Technically true, but the amount of time it would take for actual technical default to occur is measured in DAYS by most experts.

        So, no, the U.S. wouldn’t technically go in to default on October 18th, but the Post reports that “almost no one believes it will be enough past Nov. 1, when nearly $60 billion in government payments are due”. So, while they could stay out of technical default by servicing the debt while failing to meet OTHER obligations (like unemployment or social security payments), it doesn’t seem as though anyone thinks that they could do this for more than a couple of weeks. And while Moody’s might not lower their credit rating to “default” until that mass of payments comes due on November 1st, S&P has indicated that they’ll downgrade the U.S. to “selective default” pretty much as soon as the October 17th deadline hits, because while they might not be reneging on debt servicing obligations at that point, they’d pretty much instantly be not paying for SOMETHING that Congress has committed to paying for.

        It seems to me that the effects on the economy won’t be mitigated much by cries of “We’re not technically in default!” when Grampa’s social security cheque doesn’t come, or the Air Force has to start rationing fuel.

        • No, the US can avoid default entirely regardless of whether they hit the debt ceiling, and that is what Moody’s is saying. Moody’s is perfectly aware of upcoming payments.
          Debt service payments are just 6% of the budget. Tax revenue is EASILY enough to cover debt payments.
          But you keep on reading that Democratic mouthpiece called the Washington Post, because goodness knows a Democratic mouthpiece knows more about debt than than a debt rating agency.

          • Debt service payments are just 6% of the budget. Tax revenue is EASILY enough to cover debt payments.

            Of course it is. What you’re neglecting is all of the OTHER things that tax revenue is committed to paying for. As you say, paying for the debt servicing is easy if you focus exclusively on paying for debt servicing. What’s NOT easy is paying for the debt servicing while still paying all your other bills. I could keep paying my credit card bills for a long time if I stopped getting paid. That won’t stop my cable bill, and telephone bill, and insurance bill from coming in the mail, or suddenly make me free from having to buy food.

        • Yes, it makes perfect sense that a government that takes in 2,500 billion in tax revenue per year, or nearly 7 billion every single day, cannot make a 30 billion payment without borrowing money.

          Any serious math expert would say the same. How on earth could they afford to make a payment of 30 billion? Why, that’s a gigantic 1.2% of their annual revenue!

          No, clearly Moody’s is in the wrong. After all, Moody’s is dependent upon their credibility to even exist. A debt rating agency that is not objective and honest is worthless. A debt rating agency knows nothing about debt. They must be wrong. Thanks for clearing that up.

          By the way, do you always parrot the Democratic talking points word for word? Do you ever try to toss in a word of your own?

          • I’m not sure that Moody’s is “clearly wrong” but S&P disagrees with them, and S&P is in the same business as Moody’s.

          • Regardless whether S&P agrees with Moody’s debt rating, that’s irrelevant when it comes to the point I made. The point I made is that hitting the debt ceiling is not the same as a default. As Moody’s says, there is no direct connection between the two, and any debt agency would agree because that’s a fact. S&P downgraded the USA because a default was slightly more likely (not because hitting the debt ceiling is the same thing as a default). Of course, that makes perfect sense. Anybody’s credit rating is influenced by a million things, as anybody who has ever received a credit report would know. I’m not here to debate what is the correct credit rating for the USA.

            So no, S&P does not disagree with Moody’s when it comes to the statement from Moody’s that I quoted.

          • I’ll conceded that all of that is technically correct, but that also doesn’t change the fact that S&P plans to downgrade the U.S. to “selective default” basically on the 18th if they don’t raise the ceiling. Of course, it seems all moot at this point as there appears to be a deal in the works.

            I honestly stopped worrying about this the other day when I heard Republican Congressman Peter King claim that there were 100 Republican members of the House who’d vote for a “clean” resolution to end the shutdown, and one of the pundits who came on later argued that if there were a secret ballot you’d probably get 150 Republican votes for such a resolution.

          • S&P plans to downgrade the U.S. to “selective default” basically on the 18th if they don’t raise the ceiling

            Where does it say that? I’ve heard and seen nothing of the sort.

          • In the article I posted earlier.

          • No, it does not say that at all. It says it would be in selective default if it failed to pay a debt obligation. It also makes the distinction between a debt obligation and an obligation. This is essentially the same thing that Moody’s is saying. Failing to meet an obligation is not a default, the government will be able to meet all debt obligations and avoid default.
            As usual, you’re uttering complete BS.

  2. Interesting to see the obvious change at 2009. The slide of the line prior was constant. The slope of the line after was constant as well, but much steeper. Pre Obama the rate of borrowing was 600 billion per year. Post Obama, it’s been 50% higher, a rate of 1 trillion per year.
    Hope and change.

    • Indeed.

      It’s too bad for fans of the President that there wasn’t some sort of major economic crash at the end of 2008 that might explain the changes.

      • Yes, I’m sure that Obama recovery is just around the corner. It will arrive sometime in the year 3000, or whenever the next Republican president is elected, one or the other.

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