Defining the Debt Ceiling
With the debt ceiling coming up, I decided it would be a good time to revisit this subject since it pops up from time to time, steals all the headlines for a number of days/weeks/months, and then disappears just as fast. The debt ceiling is the legal limit on the total amount of federal debt that the government can accrue. The limit applies to the federal debt held by the public, mainly comprised of treasury bills and notes, which corporations, local and state governments, banks, and foreign entities can hold. The limit also applies to money the government owes itself from borrowing from accounts like Social Security and Medicare trusts.
How high is the debt ceiling?
This amount currently sits at….. $31.381 Trillion. $24.5 Trillion is held publicly, and $6.9 Trillion is government borrowing. While the government hit the debt ceiling on January 19th, the Secretary of the Treasury, Janet Yellen, sent a letter to congress and used “extraordinary measures” to keep the government from shutting down. The most notable of these extraordinary measures is the suspension of reinvestment of government securities in the G fund, which can be found in government employees’ Thrift Savings plan. After the debt ceiling impasse, the G fund will be made whole. I will let my G fund participants pass judgment on that action.
What does it take to shut down?
2018 was the last time there was an extended government shutdown when the government was shut down for 35 days. The point of contention was the funding for Trump’s border wall. Trump wanted $5.7 billion for border wall construction, but congress did not, and after pushback from the press and a change of leadership in the house from republican to democrat, the funding package went through without Trump’s wall funding.
As with many things in the media, the spin is often in the name. The “Government Shutdown” doesn’t mean that every government employee stops showing up without pay. A government shutdown furloughs nonessential government employees while keeping essential parts of the government open and functional. When a funding bill is passed, the government employees receive backpay and resume regular operation. However, I have sympathy for government employees, the negotiation piece that congress uses to push its agenda.
Benefits of Living the “Ramsey way”
The larger question should be, how have we gotten to a point where we must borrow from the Social Security fund and the G fund to meet our government obligations? I’ll be honest; the government needs to take a trip down to Nashville, stop in the PODS Moving & Storage studio, and take the verbal beating that Dave Ramsey so lovingly hands out to his callers. He is speaking the truth in love.
If you feel like the government, with spending out of control and liabilities coming due, reach out to us then we can start to formulate a plan. The government’s benefit is that they have no retirement date, so in theory, it can indefinitely continue to service the debt as a line item on its budget. If you dream of retiring one day, you don’t have this luxury. Schedule a meeting with a financial advisor or financial coach today!