This week’s theme on the Retirement Quick Tips Podcast is: Debt Ceiling 2023: What It Means For You

Today I’m talking about what the debt limit or the debt ceiling is and why it’s important.

What is the debt limit: 

The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments. 

If the U.S. Treasury reaches its debt ceiling and runs out of cash, it would be unable to pay all its bills. A failure to pay bills would represent a default by the U.S. Government.

Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit – 49 times under Republican presidents and 29 times under Democratic presidents.

Much of the time they raise the debt ceiling without much fanfare. But sometimes when there are opposing sides in power in the White House and Congress, the debt ceiling is used for negotiating on spending and borrowing by the Federal Government and things get contentious as the deadline approaches, which is what’s happening now. 

Why it matters: Failure to raise the debt limit and reach a deal means that the government basically won’t be able to pay its bills. And not being able to pay its bills means defaulting on our debt, and if that happens, a broader global financial crisis that analysts at Earnst & Young predict would be worse than the Global Financial Crisis in 2008. 

So it’s serious, but it’s also important to keep in mind that not reaching a deal would mean political suicide for those at the top, so even though the worst case scenario is possible, I don’t think it’s probable. 

When making decisions, especially financial and investment decisions, it’s important to think in terms of what is probable or likely, and not in terms of what is possible. If you think more in terms of what’s possible - especially those worst case scenarios - you’d never leave your house and any money you have would just get stockpiled under your mattress. We can’t have that, so best to think in terms of probabilities - and for that, I’ll dive deeper tomorrow into 3 different scenarios for the debt ceiling standoff tomorrow. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.    

----------

>>> Subscribe on Apple Podcasts: https://apple.co/2DI2LSP

>>> Subscribe on Amazon Alexa: https://amzn.to/2xRKrCs

>>> Visit the podcast page: https://truenorthra.com/podcast/ 

----------

Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance