John Irons's Blog


Economic News, Data and Analysis

T minus 9 days

Nine days until default….
The Senate is currently considering a $1 trillion increase in the debt ceiling, which now stands at $6.4 trillion. Just last year Congress and the President boosted the debt limit by $450 billion.
If Congress does not pass the debt-limit increase by May 28th, the government will not be able to meet its obligations to, among other things, pay social security recipients, make tax refunds, etc.
And Congress is about to pass, and the President is about to sign, the third largest tax cut in history – in the form of a dividend tax cut – that will have very little effect on the economy in the short run…
(Why a $1 trillion increase in the debt? And not something like last years’ 450 million? Well, at the rate of current deficits, that ought to last for the next couple of years, until the end of 2004 at least…) – Treasury Scrambles to Avoid Debt Ceiling
WASHINGTON — With the national debt standing just $25 million below its limit, the Treasury Department warned Congress on Monday that it would run out of room to juggle the government’s books by May 28 unless the government passed an increase in the debt limit by that time — an action caught up in the battle over President Bush’s tax cuts.
Treasury Secretary John Snow said in a letter to congressional leaders that Monday’s orders to temporarily halt investments to various trust funds would allow the government to meet its payment obligations only until May 28.
“The Treasury has now taken all prudent and legal steps to avoid reaching the statutory debt limit, including reducing the size of our regular bill auctions and drawing down available cash,” Snow said.
“An immediate permanent increase in the debt limit is crucial to preserve the confidence in the U.S. government and to prevent uncertainty that would adversely affect our economic recovery,” he said.


Filed under: Economics, Economy, Fiscal Policy, Policy, Politics



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