So, President Obama had a secret plan to default on the US public debt all along. And President Trump may have to use it.
(Bloomberg) Deep within the Treasury Department sits a once-secret plan written by the Obama administration that could lead to the first-ever default on U.S. debt. Bond traders are worried that Donald Trump’s Treasury secretary may have to use it.
The U.S. government will reach its statutory limit on borrowing some time in October, the Congressional Budget Office estimates. The Trump administration has asked Congress to raise the ceiling before then, but it is running into the same complications the Obama White House encountered: lawmakers, mostly Republicans, who want to use the debt limit as leverage for controversial policy changes.
Treasury Secretary Steven Mnuchin has said there are “plans and backup plans” to keep the government solvent through September. Bond traders suspect he is referring to preparations made in 2011 in case the Obama administration had to prioritize payments on government securities over other obligations. The Treasury chief got fresh hope that Congress may raise the debt limit before leaving for its August recess after Senate Majority Leader Mitch McConnell delayed the break by two weeks.
Yes, Congress and the US Treasury has a debt problem. Explosive debt, thanks to chronic spending by Congress, will really be facing a problem if Treasury rates rise.
Healthcare spending (such as Medicare) is growing exponentially.
Leading to a CBO forecast of over $30 trillion in the near future.
And then we have the massive underfunding of government pension plans which will require bailouts by taxpayers. Look at Illinois, for example at 40% funded.
The good news is that markets aren’t pricing in excessive debt … yet.
With Senators like Maria Cantwell running things in Congress, how bad can it be?