US debt ceiling

 

     Debt ceiling or debt limit is a legislative limit on the amount of money that the government is authorized to borrow to fulfill its financial obligations. From social security, military to medicare, the government has a lot of expenses. Because government runs budget deficits, meaning it spends more than it brings through taxes and other revenues. So the government issues debts. While the debt ceiling debate occurred, lawmakers request to cut back on government spending, lifting the debt limit to allow U.S. to finance existing obligations. 

     The national debt now stands at $28.43 trillion, which currently the borrowing cap is set at $28.4 trillion, leaving both parties, Republicans and Democrats have a long-run argument. Republicans refused to help Democrats increase the debt ceiling, in opposition to Biden's spending plans, especially $3.5 billion infrastructure plan. Biden is planning to build some infrastructure to cut carbon emissions and transform to the new energy system away from fossil fuel. 

    If the deal is not reached and the financial funding has to be cut, the federal museums, national parks, safety programs would have to close, halt the financial help for hurricane relief and Afghan refugees. Expert estimate that the Treasury could run out of money in mid to late October. In addition, it impacts individuals by cutting off benefits for seniors and paychecks for soldiers. US default could leave it unable to pay interest and maturities on Treasuries. It would produce widespread economic catastrophe and likely precipitate a historic financial crisis. Investors may lose confidence in the dollar as well, increasing inflation. Since 2011, U.S. has come to the brink of defaulting on its obligations, which many experts argue could have dire consequences for the U.S. economy and financial markets.

     In a short term, the market unrest will be a final factor to push Congress to act just days before the country goes into default. For long-term investors, make sure your money is diversified in line with your current risk tolerance and your investment objectives. You may need to explore more ways to dissipate the risk of investment loss. Anyway, stay focused on your goals.