Brief: US Debt Ceiling, 2024 Presidential Candidates

Tuesday, May 23, 2023

Short talking point:

• Current list of people running for president

  • Democrats

    • Joe Biden

    • Marianne Williamson (A Self-Help Author)

    • Robert F. Kennedy Jr. (Activist from Storied Political Family)

  • Republicans

    • Donald Trump (Former President)

    • Nikki Haley (Former UN Ambassador)

    • Tim Scott (South Carolina Senator)

    • Asa Hutchenson (Former Arkansas Govenor)

    • Vivek Ramaswamy (Wealthy Biotech Entrepreneur)

Long talking point:

• US debt ceiling

  • The debt ceiling is the maximum amount of money the US government can borrow by issuing bonds.

  • Bonds are basically a way to borrow money. The buyer of a bond is a lender. The seller of a bond is a borrower. The bond buyers pay now in exchange for promises of a larger repayment in the future—that is, they are lenders.

  • Right now, Biden and other dems are working with republicans to raise or suspend the debt ceiling. If they can’t do that, the US Treasury would be unable to borrow more money to pay for spending that has already been authorized by Congress. The current Secretary of the Treasury is Janet Yellen.

  • How the US Treasury Department borrows money: The US government borrows money by having the Treasury Department issue three types of bonds:

    • Treasury Bills (T-Bills) – Short-term maturities (1 month to 1 year) and pay interest at maturity

    • Treasury Notes (T-Notes) – Have mid-range maturities (2 to 10 years) and pay interest every 6 months

    • Treasury Bonds (T-Bonds) – Have long maturities (20 to 30 years) and pay interest every 6 months

  • If Congress can’t lift the borrowing limit, the US government would be unable to pay back its old debt and could default. Loan default occurs when a borrower fails to pay back a debt according to the initial timeframe or arrangement. If this happens with the US government, it could lead to a downgrade of US credit rating and result in higher borrowing costs (interest) in the future. 

  • The debt ceiling talks are being led by President Biden and Republican House Speaker Kevin McCarthy

  • The US debt ceiling is currently $31.4 trillion. Almost every year, the government spends more than it collects in taxes, which is why it borrows money. The national debt is the total amount of money the government owes to its lenders.

  • There is also geopolitical angle to this because China buys up a large chunk of the Treasury bonds that the US issues to borrow money.