Debt Ceiling - Overview May 25, 2023

The debt ceiling is a borrowing limit that is periodically updated and set by Congress. Once the limit is hit, the government cannot borrow more money unless the ceiling is raised. If an agreement to raise the debt ceiling is not reached or the debt ceiling is not suspended, the government could default on its debt. The risk of default increases market volatility and can ripple into the economy. If an agreement is not reached after initial default, the government will be unable to pay employee salaries, pensions, benefits, social security, medicare and other benefits programs. The reduces income and is expected to impact all levels of the economy as spending dries up. On the flip side, if an agreement is reached, the the Treasury will be raising about $500 billion or more to refill its coffers. this too can tighten  liquidity. Let’s keep an eye on progress.