![]() What has been a formality in the past has become a political means of pressure in the deeply divided US political scene more recently. The raising of the debt ceiling has happened 78 times since 1960. Government expenditures are authorized by separate legislation, but when the debt ceiling is reached, it can effectively restrain expenditure unless the debt ceiling is raised again. ![]() In the USA, the debt ceiling is a legislative limit on the gross amount of US public debt. Although debt in the USA is not headed the right way, the current debate is less about acute debt sustainability concerns and much more about the spending and tax preferences of the various political actors. However, with the average yield on the stock of debt only 2.23% in Q4 2022, it will take time and significant further increases in the stock of debt to raise the cost of debt service to the previous historical high of about 4% of GDP, a level that did not trigger financial stress for the US government. The deficit is likely to fall to about 3.6% of GDP in FY 2023, but rising bond yields will increase interest service costs over time. In 2022, the US government paid an estimated USD 475 billion in interest on its outstanding debt, about 1.9% of GDP. The budget deficit therefore was USD 1.4 trillion, representing 5.6% of US gross domestic product (GDP). Fiscal revenues have been USD 4.9 trillion over the same period. US fiscal expenditures amounted to USD 6.3 trillion in the last 12 months. The last to jump wins the dangerous game! I was reminded of this Hollywood classic by my colleague Burkhard Varnholt, when he took stock of the political debt ceiling showdown unfolding in Washington. ![]() Remember the film, “Rebel Without a Cause,” starring James Dean, the Hollywood hero of the 1950s, in which two high-schoolers face off in a “game of chicken,” which consists of racing cars on a cliff and jumping out before they crash.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |