May 24, 2023

Goss: A lot of volatility until debt ceiling is done

Posted May 24, 2023 10:00 AM

Hutch Post

HUTCHINSON, Kan. — Creighton University economist Ernie Goss is still a believer that the United States will not default on its debt, even as that cliff gets closer by the day.

"It's going to get done, but there's going to be a lot of volatility while it does get done," Goss said. "In other words, the stock market up and down, depending on whether there's an agreement or not an agreement. Of course, in the meantime, what we saw the last time this happened, that would be in 2011, we saw gold prices rise significantly as individuals sought safe havens for their funds. They just didn't want to be in corporate bonds, for example, that's a risky place to be right now."

In a Monday letter, Treasury Secretary Janet Yellen told House Speaker Kevin McCarthy that it is 'highly likely' that the country could run out of ability to pay its bills in early June, possibly as early as June 1. Goss said the debt has grown by about $53,000 per individual since the pandemic.

"That's putting real pressure on the individual," Goss said. "We've handed off the debt to our children, our grandchildren, now our great-grandchildren. It's time we faced up to it. Now, we've reached the ceiling, now the question is what will happen on the first week of June? We'll have to wait and see, but I think it will be settled, but at a cost."

Yellen wrote that the cost of this brinksmanship can "cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers and negatively impact the credit rating of the United States."

The problem with only raising the debt ceiling by a trillion dollars or a little more is that the can won't be kicked very far down the road.

"We'll have to face this again next year," Goss said. "That's one of the proposals in the Republicans plan is you have to face up to the debt ceiling next year, that's, of course an election year. Neither the Republicans or the Democrats want to do that, but that's in there. On the positive side, this brings sensitivity to the voters, the individuals, the workers, to the debt problem."

The House is only supposed to be in session until Thursday and then Representatives would go home to their districts for the Memorial Day holiday.

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