USD 31 Trillion - America Hits the Debt Ceiling - Now What?

It looks like a regular billboard but the content is not regular at all. Instead of advertising the latest perfume, theatre program, or sporting event, it provides up-to-date information - no, not the time nor the weather - but America’s national debt. The billboard is in New York City and is known as the ‘National Debt Clock.’ As of January, America’s federal debt was $31,341,547,109. That’s $31 trillion (each trillion is a million dollars a million times) in debt. Wrap your mind around that figure. As a bonus, the debt clock adds another piece of information: Your family’s share of the debt is $237,520 per family. 

America’s national debt has been frightfully increasing over many years. In the current US administration, Congress has passed several spending bills totalling over $6 trillion. Credible complaints point out that there is much ‘pork’ among the beef, including the recent 4,000-page omnibus spending $1.7 trillion, which was hastily passed before the incoming Congress took over in early January.

If that’s not all, now we get the announcement: America has reached its debt ceiling. Unless Congress agrees to raise the ceiling or suspend it altogether, the government will lack the legal authority to borrow more money to meet its financial obligations. There is a danger of a US default on its loans. This would be like a high-speed car chase inexorably heading towards a brick wall; the US needs to avoid this outcome at all costs. A default will result in global financial instability and hardship for many. Even the hint that it might happen is unsettling.

What is the debt ceiling? How can we see all this in context? And how should people of faith respond?

Perspective 

At present, the United States has the largest economy in the world. It has been an economic superpower for decades. So if its debt is big, remember that its economy is, too. America’s debt to GDP-ratio is 128%, which is lower than many countries, including Japan (240%), Italy (156%), and Singapore (131%). Covid relief spending and the economic shutdown exacerbated the debt ratio from 107% in 2019 to the present level today.

The debt ceiling is the congressionally agreed spending limit which can only be increased if the ceiling is raised. It was originally introduced during the first world war in 1917 and has been raised many times without incident. Only the first major confrontation happened in 2011 when the Republican Party demanded that President Barack Obama, a Democrat, come to the negotiating table and agree on spending caps, to which he eventually did.

These caps were either ignored or abandoned in 2018. Apparently, during the Trump years, a Republican president with a Republic Congress (until 2019), the limit was either raised or waived three times.

When America raises its debt ceiling, there are eager investors to buy and invest in the debt in treasury bonds, bills, notes, and securities. These bonds are considered the most stable and safest investment, a safe haven during periods of economic storms.

So What’s the Fuss?

As mentioned, America reached its spending cap in January 2023. In order to keep the government going, the debt ceiling needs to be raised. Yet there is a tussle between the Republican-led House of Representatives and the Democrat White House. It is not an economic debate but a political one. Congress wants to explore raising the debt ceiling in the context of a financial plan and needful cuts in spending. The White House wants no pre-conditions: just raise the debt ceiling for the sake of economic stability.

“He (Joe Biden) will not allow Republicans to take the economy hostage or make … working Americans pay the price for their schemes to benefit the wealthiest Americans and also special interests.” Karine Jean-Pierre said Jan 18th

The treasury secretary, Janet Yellen, introduced ‘extraordinary measures’ - which have been done before - to help the government function while the debt ceiling is being resolved. It is a temporary thing to prevent default. The current short-term limitations on spending should enable the government to function until June.

The problem with spending cuts is that there are limitations, including big-ticket untouchables, like defence, Social Security (aged pension), Medicare, and Medicaid. All these represent $1 trillion out of $1.6 of spending deemed off-limits. To even talk aloud about cuts with the untouchables is political suicide. The wrath of the voters would be volcanic if Social Security is even mentioned, let alone touched.

One expert says it says cutting alone may not stave off the debt bomb. They say it is better to impose a 2% growth cap on discretionary spending (and close down some government departments that really are not necessary). You could save $1 trillion in a decade.

What Can We Do?

The rich ruleth over the poor, and the borrower is servant to the lender - Proverbs 22:7

A good man leaveth an inheritance to his children's children: and the wealth of the sinner is laid up for the just — Proverbs 13:22

While we can always vote for fiscally sensible political candidates, it will take more than an election to rectify the budget blowout. It will involve spiritual solutions and a change of thinking - the fruit of revival. Just as we need to have a fiscally responsible government, we need to be the same in our lives.

1. Economic responsibility: live within your means; live by a budget; get out of needless and unsustainable debt; have cash for a rainy day. Diversify where you store your money: bank, stocks, precious metals, and property.
2. Personal discipline: in money and time management. 
3. Spiritual life: this is the most important area of all. A walk with Christ makes you a participant and beneficiary of the kingdom economy. Practice kingdom economics and get kingdom results. God will open the windows of heaven and rebuke the devourer for all those who give to Him first (Malachi 3:10-11). Isaac sowed and reaped one hundredfold in the land while it had drought and famine; God fed Elijah during the three-year dearth; Jesus served thousands of meals with five loaves and two small fish. Kingdom economics will cause you to thrive even when the earthly economy falters.
4. Trust God: this is not a trite glib phrase: it’s a lifeline. For those who trust God with all of their heart all of the time, God promises to feed you in famine (Psalm 37:3); be your provider (Genesis 22:8,14), and provide all your needs according to the inexhaustible riches of his glory (Philippians 4:19). 

Pray for leadership for fiscal sanity and wisdom; pray for revival - the only long-term solution, and pray that God’s people will walk according to kingdom economics. In economically shaking times, it will be an impressive testimony.