Economist Perspective: U.S. Government Crisis in the Making

Economist Perspective: U.S. Government Crisis in the Making


– Blu Putnam: The U.S. Federal Government may be hurdling toward a debt ceiling crisis and another possible government shutdown. The debt ceiling of just over $22 trillion went back into effect on March 1st, 2019. And the U.S. Treasury has been carefully managing its cash to stay under the ceiling. With annual trillion dollar deficits, and this is due to the 2017 corporate tax cuts, with these annual trillion dollar deficits, time will run out around August or September for the debt ceiling. Occurring more or less at the same time, authorized U.S. Federal Government funding will also end on September 30th, 2019, unless the U.S. Congress and the President can agree on new funding for fiscal year 2020. Whether the issue is the trade war with China, building the wall between the U.S. and Mexico, or allowing government officials to testify about the Mueller Report, President Trump does not appear in the mood to compromise. And the only way to raise the debt ceiling and fund the federal government for 2020 is to craft a compromise acceptable to the Democratically-controlled House of Representatives the Republican-controlled U.S. Senate, and President Trump. The odds on a deal just seem to be getting longer every day. Yes, it does appear for now that the U.S. is hurdling toward a debt ceiling crisis and a possible government shutdown in October 2019. And that might undercut economic activity, royal equity markets, weaken the U.S. dollar, and ignite a flight to quality rally in U.S. Treasury securities. I’m Blu Putnam, Chief Economist, CME Group.

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