I’m afraid I have some bad news… I know. It’s the last thing anyone wants to hear. Lord knows we’ve had far too much of it as of late. I mean, first, we get hit one of the largest pandemics the world has ever known. Then we are faced with all sorts of civil unrest, both political and health-based. And now, we have a president who seems to be losing his mind and who’s already cost at least 13 Americans their lives.
What else could go wrong?
Well, according to the US Treasury Secretary Janet Yellen, the nation has exactly one month, if not less, before we will be completely broke.
Now, I know what you’re thinking. We’ve been broke for a while now. I mean, the national debt is at what? Something around $28 trillion? If we weren’t already broke, we’d have that paid off, or at least part of it, right?
Well, yes and no.
Yes, we currently have a lot of national debt, and that’s not going to change anytime soon. But through the years since that debt has been accumulating, the federal government has brought money in, paying off debts when they can and making sure other bills are getting serviced.
The problem is that our national debt has limits, called a debt ceiling. Congress agreed upon that. We are at that limit. And yet, the bills keep coming in as they always do, with not enough revenue earned to pay for them.
As Yellen explains, “Once all available measures and cash on hand are fully exhausted, the United States of America would be unable to meet its obligations for the first time in our history.” She adds that “based on our best and most recent information, the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October.”
Again, not too many of you might be worried about this all that much. After all, the US has been in tough financial spots before, and we’ve always pulled through. Besides, this is the federal government we are talking about. It’s not like it affects your personal finances all that much, right?
Yellen’s reference to the US as ‘the United States of America’ should be some clue as to how serious this is, you know, kind of like when your mother uses your full name, as opposed to your first name or nickname…
You see, should the US be left without a penny to our national name and no way to pay our debts to other nations or bills for their services to us, our credit is essentially shot. Along with now being seen as a dog without a bone or a bite, thanks to Biden’s recently botched withdrawal from Afghanistan, nations will now look at us as even more untrustworthy, irresponsible, and too much of a liability and risk to work with.
And when that happens, those nations will begin raising interest rates, implementing sanctions, and doing whatever they feel necessary to get their money from us. And that means prices from everything from the socks on your feet to the toothbrush in your bathroom will go up even more. And don’t even get me started on what it would do to small businesses or really anybody with a loan.
As Yellen says, it would “cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”
The only solution, at least for the short-term, is to raise the debt ceiling, allowing the US to take on more debt but to keep things moving so that we can still manage to pay other obligations and keep up our good name, at least when it comes to paying our debts.
Of course, this comes with its own problems, as it is unlikely that Republicans will agree to such. According to Axios, many GOP members believe raising the ceiling will only encourage more reckless spending. However, not doing so will essentially send the nation into despair.
Senate Minority Leader Mitch McConnell suggested that maybe the Democrats could add it to their budget reconciliation bill, blaming additional debt on the left-leaning party.
But Yellen says a “regular order, with broad bipartisan support,” is needed.
I’m not sure that really matters, seeing as Congress nor any one party will be left paying for the debt. That will be up to our children and our grandchildren, won’t it?