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The U.S. national debt limit March 19, 2017

Posted by hslu in Debt and deficit, Economics, Taxes, US Government.
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March 16, 2017 is an important date for U.S. federal government because it can no longer borrow from the public as it has been in the past to fund its operations.

The American national debt will be frozen at its current level: about $20.1 trillion because the mandatory debt level has been reached.

But, that doesn’t mean America is out of cash to pay its bills: principal and interest on the debt, social security benefits, Medicare and Medicaid payments, salary to government workers and soldiers and payments to government contractors for F-35 stealth fighter jets, new Ford class aircraft carrier, M-4 assault rifles and M1 A3 Abrams tanks. 

However, there will be no infrastructure projects. No Trump border wall. no  tax cuts for American citizens and no tax relief for American corporates until the debt limit is raised by the Congress.

As of now, the Treasury Dept has to use extraordinary measures to keep the federal government from shutting down until about October or November 2017. By then, Congress has to raise the debt limit or the U.S. government will be in bankruptcy.

Assuming the debt limit is lifted in time, when will this borrowing end? 

Maybe America can use the threat of bankruptcy to re-negotiate with its creditors. Several optionsare available such as forcing creditors to take 60% haircut on all outstanding loans, change the term of existing loans to 100 years and modify interest rates on all loans to negative.

Alternatively, American federal government, maybe all Americans should consider this option too, should cut up every credit card it uses and start living within its means.

Is this likely in the next two decades? Not a chance unless pink pig flies.

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