Mind over Matter: Perspective for Investors on the US Debt Ceiling
If ongoing debate over the debt ceiling is giving you a dizzying sense of déjà vu, you are forgiven. The debt ceiling, or limit, reflects the amount of money the United States Congress has authorized the government to borrow, and Congress can authorize increases when the government nears or reaches the existing limit. According to the US Treasury Department, Congress has acted to effectively raise the debt ceiling 78 distinct times since 1960. Occasionally, policymakers have struggled to reach consensus to authorize increases.
The US effectively reached the debt limit in January, triggering “extraordinary measures” by the Treasury Department to allow continued servicing of existing debts and obligations. But Treasury Secretary Janet Yellen has issued a warning that the “X-date,” when these extraordinary measures may be exhausted, could come as soon as June 1. As the X-date approaches without a political consensus to raise the debt limit, many investors are wondering how a breach of the debt ceiling could impact their investments.