debt ceiling

Over at The Economist, Greg Ip does a nice job providing some additional details on what I posted earlier this week: Contrary to what some are saying, not raising the federal debt ceiling when it's reached later this year doesn't mean the government automatically will default on its debt.  To the contrary, the Treasury has a number of money management techniques available to it to avoid a default even if the debt ceiling isn't raised and...as Greg notes...is very likely to use them.

Meanwhile, over at Reuters, Felix Salmon says that Greg is right and that he hasn't seen the default-isn't-mandatory argument made anywhere else.  I congratulate Felix for joining the club and will send him the link to my post shortly.

Much of what being said about what happens if the federal debt ceiling isn’t raised immediately when the current borrowing limits is reached is just wrong.  My column in this week’s Roll Call tries to correct the misinformation, misunderstanding, and...well...lies.

We'll know much more about what, if anything, Congress will be able to do with fiscal policy when returns from its two-week recess next week.

In the meantime, some of the plans that were discussed before the recess began, especially the possibility of Congress not completing a budget this year, may have to be abandoned in light of the new projection provided by the Congressional Budget Office that, contrary to what many on the Hill had hoped, the current debt ceiling will have to be raised before the election. (Here's what OMB Watch reported on the subject.)

Bond traders rejoice; you're about to have a lot of product to sell.

The Treasury said last week that the government would reach its borrowing limit by October 1.