Understanding the How the Debt Ceiling Pertains to You StrandLife Wealth

Making Sense of the Debt Ceiling

First, let’s understand what the national debt ceiling really is: The national debt ceiling is the maximum amount of money that the US government can borrow to fund its various expenses, such as Social Security and Medicare benefits, tax refunds, military salaries, and interest payments on existing debts. Due to the country’s budget deficit, which is where the government spends more than it generates from taxes and other sources, the US must borrow from other nations to meet its financial obligations.[1]

In terms of borrowing money, the country has a limit known as the debt ceiling, which is set by Congress. This limit determines the maximum amount the country can borrow. In the past, the debt ceiling has been raised on multiple occasions. However, the political climate of the moment can make it difficult to increase the debt ceiling due to disagreements among policymakers on how to approach the matter. In other words, there is no guarantee that an agreement will be made.[2]

How the Debt Ceiling Pertains to You

Here are some potential consequences if the United States ever hits the debt ceiling and is no longer able to borrow money:

  1. Federal benefits such as Medicare and Social Security could be delayed or frozen, with no clear timeline for when they might be paid out.[3]
  2. Military and government-funded jobs could also see a freeze in pay.[4]
  3. A recession could occur, potentially leading to job cuts and widespread unemployment.[5]
  4. Interest rates would rise, impacting not just large-scale finance but possibly the interest on loans for everyday Americans as well, including home loans, business loans, and credit cards.[6]

To be well-equipped for any potential economic downturn, seeking guidance from a financial advisor can be a smart move. They possess the expertise to assist you in arranging your finances in a manner that enables you to make informed decisions regarding risk management and current economic circumstances. If you are looking for more information, please get in touch with one of our professionals today for a complimentary financial review.