Tuesday, October 8, 2013

Debt Ceiling of United States

Congress has been kicking the can down the road on debt ceilings for many years now. A deadline date is looming that requires another increase in the allowable debt ceiling to insure that government obligations get paid as promised. Really? It is one thing to borrow money for long term projects that can be seen as an investment in the country's future, but to continually raise the nation's credit line to fund check disbursements for monthly obligations is troubling to say the least. Financial literacy resources for consumers has been a hot topic for credit unions over the past few years. It seems as if financial literacy education is necessary by our leaders in Congress as well. The current debt situation of the United States is not a political party issue as both major political parties have greatly contributed to the excess spending habit in Washington. Expenses need to fall closer in line with revenues.We can't continue to borrow money to fund basic operations of government. Like consumers, our government needs to live within its means.

Our nation's economy and business community need leadership and financial stability out of Washington, DC. A further reduction of the nation's credit rating is at risk because the credit rating services all said how and why it would be lowered possibly in the future. Inaction and unsatisfactory attention to the debt problem would result in a further lowering of the credit rating. That pretty much sums up what has occurred in Washington. Why would it matter if the credit rating were lowered? Financial markets and retirement accounts could take a hit. Most investment policies require a minimum investment grade for investments held within a portfolio. When owned investments fall below the minimum investment grade level they must be sold and removed from the portfolio. When the volume of selling goes up, what generally happens to the price?? Demand would also be lowered because there would be less investment buyers available. A large supply combined with low demand  would translate to greatly reduced values for investments backed by the United States government. This scenario possibility is not good at all.

Our nation's debt is not going away. It increases in size every day. The level of debt held by the United States is not a political party issue. It is an American issue. The message to Congress should be clear - address the debt problem and begin a plan to reduce the nation's debt. Any action would be better than no action. Hopefully Congress will recognize the financial stakes at play here and formulate an effective debt reduction plan.

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