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As many of us know, regularly spending more than you earn is an easy way to jeopardize your financial health by amassing too much debt. So, it can be hard to watch the national debt grow at a rate that those who spend prudently might consider irresponsible. That said, the U.S. government is not an individual and, for better or worse, sometimes lives by different rules.
Congress, like many households, has been known to squabble over finances, just with higher stakes. It’s worth recalling that the current showdown over raising the national debt limit is well-trodden territory:
A quick refresher on the debt ceiling:
Congressional skirmishes over raising the debt ceiling often center on the size of the national debt. So, how high is U.S. public debt? And how does it stack up to that of other developed markets?
How did markets perform during the 2011 and 2013 debt-ceiling crises?
Despite equity and debt markets’ ability to largely brush off these skirmishes, there are indeed potentially dire consequences for not raising the debt ceiling. What happens if Congress doesn’t raise the debt ceiling — or delays further?
Many economists have warned that failing to raise the debt ceiling would have dire economic consequences. As ominous as that sounds, we should remember that we’ve been down this road before. As Yellen pointed out in her op-ed, “the U.S. has always paid its bills on time.” While debt-ceiling showdowns can contribute to market volatility, history has also shown that markets tend to look past these skirmishes.
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