As President Reagan once said: we don’t have a revenue problem. We have a spending problem!
The U.S. reached its debt limit on Wednesday, meaning that the federal government no longer has the authority to continue borrowing money to finance the its operations. Congress will now face a vote in the near future to raise the debt limit for the first time since November 2015, when the Republican controlled Congress and then-President Barack Obama reached a deal that lifted the limit through March 15, 2017.
The Treasury Secretary Steven Mnuchin sent Congress a letter last week which said the Treasury will be able to take what are known as “extraordinary measures” to continue to fund the government’s operations in the near-term, so a government shutdown isn’t imminent. But votes to increase the debt limit are politically unpopular given that the national debt exceeds $19.9 trillion, so lawmakers will let those measures play out to buy themselves time. We’ve explained some of the obscure accounting gimmicks that let the federal government keep spending after the debt limit is reached below:
This reminds me of this brilliant video.