WEBVTT - What's the deal with the debt ceiling? 0:00:01.040 --> 0:00:04.520 Welcome to you. Stuff you should know Fronhouse stuff works 0:00:04.519 --> 0:00:12.399 dot com right, and uh, this is stuff you should 0:00:12.400 --> 0:00:16.760 know Financial times. Yeah, and you know what, Usually I 0:00:16.840 --> 0:00:21.200 shy away from finance, as you know. Yeah, this was 0:00:21.560 --> 0:00:26.079 This was good though, like timely and easy to understand. 0:00:26.760 --> 0:00:29.440 And I don't think a lot of people. Oh that's 0:00:29.440 --> 0:00:31.400 not true. I don't know how many people I know 0:00:31.480 --> 0:00:33.560 when people say that, I don't think many people. Most 0:00:33.600 --> 0:00:36.440 people don't understand what I understand. But I think if 0:00:36.440 --> 0:00:39.280 you were like me before, you probably didn't know what 0:00:39.320 --> 0:00:41.559 the death ceiling was. And it's really not that difficult. 0:00:41.760 --> 0:00:43.599 I mean, yeah, I had an idea what the death 0:00:43.640 --> 0:00:46.080 ceiling was. It certainly didn't understand the nuts and bolts 0:00:46.120 --> 0:00:49.280 of it. And I also didn't understand that it's fairly 0:00:49.320 --> 0:00:52.879 straightforward the whole thing, yeah, or that our company or company, 0:00:53.720 --> 0:00:56.960 how's that proportian slip our country? The way they do 0:00:57.000 --> 0:01:00.600 business is just it's it's kind of staggered. Oh, it's 0:01:00.600 --> 0:01:03.520 an enormous shell game. It's pretty weird that's being held 0:01:03.520 --> 0:01:06.280 together with duct tape and bubble gum. It's disheartening and 0:01:06.319 --> 0:01:09.680 frightening and all that stuff. So um chuck. The debt 0:01:09.720 --> 0:01:11.800 ceiling has been around for a while, and we'll talk 0:01:11.800 --> 0:01:14.400 about the history of it in a little while, But um, 0:01:14.440 --> 0:01:16.880 it really kind of came into focus in two thousand 0:01:16.920 --> 0:01:20.959 eleven there was a big fight over raising the debt ceiling, 0:01:20.959 --> 0:01:23.720 which to that point had happened more than a hundred 0:01:23.760 --> 0:01:29.679 times since the beginning of the twentieth century UM, and 0:01:29.720 --> 0:01:32.720 it had been routine at any given point in time, 0:01:32.800 --> 0:01:35.080 like it was just that ceiling needs to be raised, 0:01:35.080 --> 0:01:38.080 Congress says, okay, raise it, and that's that. In two 0:01:38.440 --> 0:01:42.839 eleven UM, thanks to a faction of the Republican Party 0:01:42.840 --> 0:01:47.200 known as the Tea Party, the this very normal procedure 0:01:47.680 --> 0:01:50.480 or routine i should say procedure of raising the death 0:01:50.520 --> 0:01:55.080 ceiling was basically like held up and the therefore the 0:01:55.120 --> 0:01:58.760 function of government was basically held hostage. And it happened 0:01:58.760 --> 0:02:05.240 again in two thousand thirteen to even greater effect. But um, 0:02:05.560 --> 0:02:11.800 what's crazy to me? After understanding and investigating what the 0:02:11.840 --> 0:02:16.680 debt ceiling is and what's going on, I'm chilled to 0:02:16.760 --> 0:02:19.799 say that I understand it from both sides now, Like 0:02:19.919 --> 0:02:22.639 I get where both sides are coming from and why 0:02:22.720 --> 0:02:26.360 the debt ceiling is this. It is literally the full 0:02:26.400 --> 0:02:31.519 chrome on which the entire federal government, the entire country, 0:02:32.080 --> 0:02:34.520 and not just the operations of the government, but the 0:02:34.520 --> 0:02:37.600 whole U. S economy, and in turn, the global economy 0:02:38.120 --> 0:02:42.400 sits rests. And if you hold up the debt ceiling, 0:02:43.280 --> 0:02:47.119 you hold the entire global economy hostage. If you hold 0:02:47.200 --> 0:02:49.720 up the process of raising the debt ceiling, yes, yeah, 0:02:49.800 --> 0:02:51.840 you might hold it up like a buttress. If you 0:02:51.960 --> 0:02:54.959 hold yes, if you're doing that, then your back hurts. 0:02:56.080 --> 0:02:59.040 But that's that's the point. That's why it was pretty 0:02:59.080 --> 0:03:02.200 shrewd to target the debt ceiling. But it's not just shrewdness. 0:03:02.720 --> 0:03:05.679 Like I I understand that the people who held it 0:03:05.760 --> 0:03:10.560 up were characterized as political terrorists. I think even if 0:03:10.600 --> 0:03:12.959 you take that aside or not, like, it was pretty 0:03:13.000 --> 0:03:16.920 smart that to target that, not just because that's a 0:03:16.960 --> 0:03:19.400 great thing to hold hostage, but because you can make 0:03:19.440 --> 0:03:23.040 a case like they're in is the greatest symbol or 0:03:23.120 --> 0:03:26.320 functional symbol of all of the problems that are plaguing 0:03:26.360 --> 0:03:30.360 the United States today or the solution to all of 0:03:30.400 --> 0:03:33.280 its problems. Man, you are right down the middle on 0:03:33.320 --> 0:03:35.480 this one, aren't you. I I truly understand it from 0:03:35.480 --> 0:03:38.560 both sides. It's really weird. I think that's a healthy perspective. 0:03:38.800 --> 0:03:41.120 I guess so, and maybe that's what it is. I'm like, well, 0:03:41.160 --> 0:03:47.680 I feel healthy, healthy perspective. Uh yeah, it definitely beats uh, 0:03:48.880 --> 0:03:52.640 hardline partisan views on things. I think when it comes 0:03:52.640 --> 0:03:57.160 to something this huge and complicated, Well, the irony is 0:03:57.200 --> 0:03:59.440 that the people who were holding it up or about 0:03:59.440 --> 0:04:02.720 his hardline partisans as you can get you know. Yeah, 0:04:02.880 --> 0:04:07.720 but the prospect of attacking the debt ceiling and focusing 0:04:07.840 --> 0:04:11.760 light on it is I think a very smart move politically. Yeah. 0:04:12.200 --> 0:04:15.120 So it may not make friends on the playground, No, 0:04:15.280 --> 0:04:18.760 it definitely will not. It is effective. Yeah, okay, so Chuck, 0:04:18.800 --> 0:04:20.840 let's talk about this. Let's talk about the debts. Let's 0:04:20.839 --> 0:04:23.640 talk about the federal government in general and how it operates. Yeah. 0:04:23.640 --> 0:04:26.520 There's a thing that I didn't know exist until recently. Um, 0:04:26.520 --> 0:04:28.880 that is issued every day called the Daily Treasury Statement. 0:04:29.360 --> 0:04:31.279 And if while we're doing this, this sounds just like 0:04:31.320 --> 0:04:33.840 a company or just like given your own personal finance, 0:04:33.880 --> 0:04:36.120 as as it is, it's just a large a lot 0:04:36.200 --> 0:04:39.680 more zeros, a lot more zeros. But it's the principles 0:04:39.720 --> 0:04:43.320 the exact same. Yeah. Um, the daily Treasury statement is 0:04:43.320 --> 0:04:46.760 basically just the balance sheet of what we spend in 0:04:46.800 --> 0:04:49.400 a day as a government and what we take in 0:04:49.400 --> 0:04:52.080 in a day. So let's just pick a day at 0:04:52.160 --> 0:04:56.240 random that's featured in this article. Okay, let's say October. Okay, 0:04:56.279 --> 0:04:59.520 October three of last year, not too long ago. It's 0:04:59.520 --> 0:05:02.640 a third a The sun was shining here in Atlanta. 0:05:02.960 --> 0:05:05.040 The federal government took in about a hundred and ten 0:05:05.080 --> 0:05:09.200 billion and revenue. We were in Los Angeles. Yeah, the 0:05:09.240 --> 0:05:12.360 sun was shining there. Took it in about a hundred 0:05:12.400 --> 0:05:16.039 and ten billion dollars from things like massive amounts of 0:05:16.040 --> 0:05:20.080 taxes that we have to pay my words, bailout loan 0:05:20.080 --> 0:05:25.880 payments from tarp uh selling old jet planes and things 0:05:25.920 --> 0:05:30.040 and guns to other countries, about twenty seven million dollars 0:05:30.080 --> 0:05:33.800 made on that day alone. Uh. And then we spent 0:05:35.160 --> 0:05:38.920 a hundred and forty three billion dollars. So if we 0:05:39.000 --> 0:05:41.159 took in a hundred and ten and we spent a 0:05:41.200 --> 0:05:43.400 hundred and forty three billions, and we spent a hundred 0:05:43.400 --> 0:05:50.240 and forty three on hundreds, if not thousands, of programs 0:05:50.240 --> 0:05:53.640 just all sorts of everything from Social Security to think 0:05:53.680 --> 0:05:56.280 made up the lions share of the the spending that day, 0:05:56.320 --> 0:06:01.400 which was billion um down to tax refunds and not 0:06:01.440 --> 0:06:05.080 just programs, but like you know, the electric bill at 0:06:05.080 --> 0:06:08.760 the White House, right exactly, paying the private in the army. Yes, 0:06:08.920 --> 0:06:12.200 like you know, everything the government pays for, which includes 0:06:12.200 --> 0:06:15.720 a lot of programs. Uh. So that is a difference 0:06:15.880 --> 0:06:20.039 of thirty three billion dollars in that one day, A 0:06:20.080 --> 0:06:23.960 bad a negative difference, right, So that's a deficit we 0:06:24.040 --> 0:06:26.479 ran on that day. We ran a deficit, which is 0:06:26.480 --> 0:06:31.320 not unusual. Thirty three billion dollar deficit on October three. Okay, 0:06:31.360 --> 0:06:34.120 So the rest of the three d and sixty four 0:06:34.200 --> 0:06:38.600 days of that year fiscal or otherwise calendar, even if 0:06:38.600 --> 0:06:40.080 we didn't let's say we had a day where we 0:06:40.160 --> 0:06:44.039 ran a surplus. Um. You take all of those together, 0:06:44.279 --> 0:06:47.560 You take your surpluses and your deficits for all those days, 0:06:48.000 --> 0:06:50.360 and you add them up, and you have whether you 0:06:50.800 --> 0:06:53.920 have a surplus or a deficit for the year. If 0:06:53.920 --> 0:06:56.200 everything equals out, you have what's called the balanced budget 0:06:56.320 --> 0:06:59.240 for that year, which is just doesn't happen, not not 0:06:59.400 --> 0:07:02.440 very frequently. No, I don't see I haven't seen any balance. 0:07:02.520 --> 0:07:07.640 I've seen like for the most part, though, we've been 0:07:07.680 --> 0:07:10.960 in a death sit especially since um, well for many 0:07:10.960 --> 0:07:14.120 many years. Well I've got some numbers actually, uh in 0:07:15.120 --> 0:07:17.840 and this I'm not saying this president is good. This 0:07:17.880 --> 0:07:21.720 president is bad because Congress in the House have probably 0:07:21.720 --> 0:07:23.360 more to do with it than the president does. Well. 0:07:23.360 --> 0:07:27.040 Not only that, it's possible some presidents have inherited the 0:07:27.040 --> 0:07:30.800 the benefits of policies from other presidents, like economists don't know. Yeah, 0:07:31.040 --> 0:07:34.080 like it very contentious to man when people start I 0:07:34.120 --> 0:07:36.840 read a few articles. It's really pretty interesting to see 0:07:36.880 --> 0:07:42.560 people's takes on the economies of the presidency. But in ninete, regardless, uh, 0:07:42.680 --> 0:07:45.880 Bill Clinton inherited a two hundred and fifty five billion 0:07:45.920 --> 0:07:51.240 dollar deficit. Uh. In two starting, we had the first 0:07:51.240 --> 0:07:55.480 budget surplus since nineteen sixty nine, and then two years 0:07:55.560 --> 0:07:58.280 later in two thousand, we hit the high water mark 0:07:59.160 --> 0:08:02.480 of two hundred already six billion dollars surplus in two thousand. 0:08:04.240 --> 0:08:07.200 I mean, that's mind boggling these days. Yeah, man, to 0:08:07.200 --> 0:08:09.880 think about that. That means that the government, after paying 0:08:09.920 --> 0:08:12.440 all of its bills, still had two hundred and thirty 0:08:12.520 --> 0:08:15.960 six billion dollars left over. Yeah. And and people today 0:08:16.000 --> 0:08:18.800 still are like Clinton got lucky because the internet boom 0:08:19.000 --> 0:08:21.840 or no. Clinton's policies were wide or no, it was 0:08:21.920 --> 0:08:26.920 the Republican controlled house in Congress that forced him. It 0:08:27.040 --> 0:08:29.040 was it was kind of a lot of stuff. I 0:08:29.080 --> 0:08:32.920 think the rational approaches, There was a lot of stuff. Regardless, 0:08:33.160 --> 0:08:36.200 those were great years. Uh. And then so in two 0:08:36.200 --> 0:08:40.520 thousand and two hundred thirty six billion dollars surplus. Clinton 0:08:40.600 --> 0:08:43.240 left office with a hundred and twenty seven billion dollars surplus, 0:08:43.880 --> 0:08:45.839 and just a year later we had a hundred and 0:08:45.920 --> 0:08:49.960 fifty seven billion dollar deficit. And by the time Obama 0:08:50.000 --> 0:08:52.520 came into office in two thousand nine, we had a 0:08:52.640 --> 0:08:57.040 one point two trillion dollar deficit when he came into office. Yes, 0:08:57.240 --> 0:09:01.160 and now it's at about seven fifty nine billion, depending 0:09:01.160 --> 0:09:03.200 on what numbers you look at. That's just the deficit, 0:09:03.280 --> 0:09:06.680 not the national debt. Okay, all right, So this is 0:09:06.840 --> 0:09:10.000 this is a very big point of um clarification that 0:09:10.040 --> 0:09:14.800 we need to make. That's the annual budget, right, Yeah, 0:09:14.800 --> 0:09:18.920 that's the deficit. Now, when you take all of those 0:09:18.960 --> 0:09:22.559 annual budgets over all the years, all the money we've 0:09:22.600 --> 0:09:24.640 ever owed, all the money we've ever came out on 0:09:24.720 --> 0:09:27.480 top with, come out on top with, and you put 0:09:27.520 --> 0:09:31.800 it all together, you have what's called the national debt. Yeah, 0:09:31.800 --> 0:09:34.680 that's basically the money we borrow to cover those losses. 0:09:35.000 --> 0:09:39.040 If if we ever had if you ever took all 0:09:39.080 --> 0:09:41.240 of those years together and we had a surplus, then 0:09:41.280 --> 0:09:44.160 you would call it the national surplus. I don't think 0:09:44.200 --> 0:09:48.520 that's ever happened, or ever will happen. I don't think 0:09:48.520 --> 0:09:52.800 that's ever happened. Yeah, since we started borrowing money, even 0:09:52.840 --> 0:09:56.680 though we've had budget surpluses, right, because let's say we've 0:09:56.800 --> 0:09:59.880 we've had a good year two fifty billion dollars surp 0:10:00.120 --> 0:10:04.079 us year. That's a great year, but we also maybe 0:10:04.080 --> 0:10:06.880 had five trillion dollars in national debt that that had 0:10:06.880 --> 0:10:10.840 to be thrown at. Right, So, when you take all 0:10:10.880 --> 0:10:12.920 of those deficits, in all the surpluses, and you add 0:10:12.920 --> 0:10:15.040 them all together, what you come up with is how 0:10:15.120 --> 0:10:17.480 much in the hole the United States is, and that 0:10:17.640 --> 0:10:20.080 is the national debt. And as it stands right now, 0:10:20.920 --> 0:10:26.760 it's add about seventeen trillion, two hundred and eighty two billion, 0:10:27.400 --> 0:10:34.160 five hundred and seventy five million, zero forty four thousand, 0:10:34.400 --> 0:10:38.200 seven hundred and fifty five dollars and thirty five cents. 0:10:38.720 --> 0:10:42.920 That's as of January two thousand, fourteen, and with every 0:10:42.960 --> 0:10:45.400 minute getting more and more so it's tired now than 0:10:45.400 --> 0:10:47.560 it was when you read it, which is a pretty 0:10:47.600 --> 0:10:52.200 significant amount, especially if you consider that in two thousand 0:10:53.240 --> 0:10:56.160 it was at about five trillion. Yeah, you know a 0:10:56.280 --> 0:10:57.960 number is bad when you have to look at it 0:10:58.000 --> 0:11:01.920 from right to left and counting to zeros, like I 0:11:01.960 --> 0:11:04.760 gotta see what the thousands of millions of billions? Okay, 0:11:04.960 --> 0:11:08.280 oh that's trillions. Yeah, so if you if you think 0:11:08.320 --> 0:11:10.400 about that, I mean, think about that, chuck in. In 0:11:10.640 --> 0:11:16.720 just fourteen years, like we've gone up well over twelve 0:11:17.320 --> 0:11:23.160 trillion dollars in debt, twelve trillion dollars, our national debt 0:11:23.600 --> 0:11:27.880 has increased by that much. And so now we kind 0:11:27.920 --> 0:11:31.280 of come to my intro again, if you'll indulge me 0:11:31.320 --> 0:11:35.959 for a second, if you look at the increase. Right, 0:11:36.080 --> 0:11:38.640 of course, there were there were two wars that we 0:11:38.720 --> 0:11:43.400 fought there EXPI that definitely did that didn't help anything 0:11:43.400 --> 0:11:45.840 at all. Like it started, Flint was not at war. 0:11:45.920 --> 0:11:47.800 So that was a lot of people to say, you know, 0:11:47.920 --> 0:11:50.160 those were eight peaceful years. I think they call it 0:11:50.200 --> 0:11:56.920 a piece okay, Yeah. Clayton preferred the surgical um air strike. 0:11:57.160 --> 0:11:59.680 That was his big thing, rather than troops and relying 0:11:59.720 --> 0:12:04.600 on though. Um. But it was so wars they cost 0:12:04.720 --> 0:12:07.000 quite a bit of money, so we were fighting not one, 0:12:07.040 --> 0:12:09.520 but two wars. Then all of a sudden you have 0:12:09.760 --> 0:12:13.600 the global markets just go into the toilet. And now 0:12:13.600 --> 0:12:15.760 all of a sudden, you have a lot of people 0:12:16.000 --> 0:12:19.760 who are unemployed, which means your tax revenue goes down, 0:12:21.000 --> 0:12:26.000 and you have in the in the office a president 0:12:26.080 --> 0:12:31.599 who believes in spending your way out of a crisis, 0:12:31.960 --> 0:12:35.200 a debt crisis. And this is why the Tea Party 0:12:35.280 --> 0:12:40.280 hijacked the the debt ceiling because a lot of people 0:12:40.320 --> 0:12:43.120 are saying, we don't agree with you. There's a lot 0:12:43.160 --> 0:12:45.520 of people who believe in austerity, which is you cut 0:12:45.600 --> 0:12:49.640 government spending to get your way out of a crisis. Um. 0:12:49.679 --> 0:12:52.480 And if you look at Greece, that pretty much proved 0:12:52.520 --> 0:12:54.800 that you can't do that, that it will just completely 0:12:54.840 --> 0:12:58.200 destroy your economy and possibly your entire government. And that 0:12:58.320 --> 0:13:01.880 was actually based on a paper by a couple of economists, 0:13:02.400 --> 0:13:08.200 um who came out with this data that any government 0:13:08.360 --> 0:13:12.080 whose debt to income ratio was if your debt was 0:13:12.760 --> 0:13:15.440 you GDP, you didn't grow as fast and so all 0:13:15.440 --> 0:13:18.240 of a sudden you had all these people saying austerity, austerity, 0:13:18.320 --> 0:13:21.000 And then it turned out that this grad student from 0:13:21.040 --> 0:13:23.960 I believe m y u Um got ahold of the 0:13:23.960 --> 0:13:26.360 original data set and basically saw that they didn't carry 0:13:26.440 --> 0:13:30.160 like a zero and got an incorrect thing. And the 0:13:30.160 --> 0:13:35.880 the government of Greece almost toppled because of this incorrect paper. Yeah, 0:13:36.440 --> 0:13:38.800 but at the time, there are a lot of people saying, well, 0:13:38.840 --> 0:13:42.400 first of all, we don't agree with deficit spending as 0:13:42.400 --> 0:13:46.359 a means of getting out of an economic problem. Um. 0:13:46.400 --> 0:13:50.280 But also you have some other people saying we maybe 0:13:50.320 --> 0:13:52.720 that works, maybe it doesn't. History hasn't proven that yet. 0:13:52.880 --> 0:13:55.760 We still think as twelve trillion dollar increase in the 0:13:55.840 --> 0:13:59.280 national deficit is too much, so we need to curb 0:13:59.320 --> 0:14:03.200 this runaways spending. And one way to do that is 0:14:03.240 --> 0:14:06.959 to target the debt ceiling. Yeah, and debt ceiling, I 0:14:07.000 --> 0:14:10.480 don't even think we've even said specifically, is basically the 0:14:10.520 --> 0:14:16.320 maximum amount of of deficit that we can incur. And 0:14:16.360 --> 0:14:19.680 we literally it's got a ceiling. When we borrow or 0:14:19.720 --> 0:14:21.800 when we have a deficit that hits that, we're at 0:14:21.840 --> 0:14:24.400 the debt ceiling. And the only way to to change 0:14:24.440 --> 0:14:27.800 that is, uh for Congress, like we said, to to 0:14:27.920 --> 0:14:30.760 raise the debt ceiling, which has happened, Um, how many 0:14:30.760 --> 0:14:34.320 times I think at least a hundred times since it started. Well, 0:14:34.360 --> 0:14:38.400 since nineteen sixty they voted seventy eight times. So let's 0:14:38.440 --> 0:14:41.280 call that modern times. Yeah, because okay, So, no matter 0:14:41.320 --> 0:14:43.560 what your politics are, no matter what's going on, no 0:14:43.600 --> 0:14:46.560 matter whose president, this is the way the federal government 0:14:46.600 --> 0:14:48.360 is set up. You have a bunch of money going out. 0:14:48.760 --> 0:14:50.840 You have a bunch of money coming in, usually in 0:14:50.840 --> 0:14:53.120 the form of income tax or like you said, selling 0:14:53.120 --> 0:14:56.280 old fighter jets or that kind of thing. Um, And 0:14:56.400 --> 0:15:00.240 the amount you have coming in very very rarely seeds 0:15:00.280 --> 0:15:02.800 the amount you're putting out. So there's two things you 0:15:02.840 --> 0:15:06.560 can do. You can increase your income, or you can 0:15:06.600 --> 0:15:10.600 cut your spending and raise taxes right so, um the well, 0:15:10.680 --> 0:15:13.440 increasing income by raising taxes right exactly, or you can 0:15:13.480 --> 0:15:16.640 cut your spending. We have two political parties. One is 0:15:16.680 --> 0:15:21.600 completely attached to not increasing taxes, the other one is 0:15:21.680 --> 0:15:26.120 completely attached to not cutting spending, especially on entitlement programs. 0:15:26.680 --> 0:15:30.120 So it doesn't matter who's in office these days. The 0:15:30.160 --> 0:15:33.040 way that things operate is you just go borrow more money. 0:15:33.480 --> 0:15:36.360 That's how you fund the government. That's how it's been done, 0:15:36.440 --> 0:15:40.920 that's how you've gotten around the politics to this point. Yeah, 0:15:41.080 --> 0:15:43.080 and we could, you know, Congress could erase that, you 0:15:43.120 --> 0:15:46.400 know by like you said, raising taxes that's not popular, 0:15:47.520 --> 0:15:50.280 or cutting spending and that that's not popular. So it's 0:15:50.280 --> 0:15:52.640 really kind of a bad situation. So what we have 0:15:52.800 --> 0:15:57.600 is the U. S. Treasury, which issues death that's right, 0:15:57.760 --> 0:16:02.720 US Treasury securities to people regular old schmos. Well not 0:16:02.800 --> 0:16:06.120 regular lord schmos. No, we can well, that's true, that's true. 0:16:06.240 --> 0:16:11.520 You can go buy a US Treasury bond, banks, corporations, governments. UM. 0:16:11.560 --> 0:16:16.080 It's basically a very low interest rate loan and uh, 0:16:16.200 --> 0:16:20.480 you know, up until recently a very very safe one, right, 0:16:20.600 --> 0:16:22.520 and you would still think it's pretty safe. But you know, 0:16:23.120 --> 0:16:25.280 that could go off the cliff. It could. And that 0:16:25.320 --> 0:16:28.400 was the big problem in October of two thousand thirteen 0:16:28.480 --> 0:16:30.520 is a lot of people were saying, like, um, we're 0:16:30.520 --> 0:16:33.880 gonna default on our loan obligations. Yeah, we'll get to 0:16:33.920 --> 0:16:36.840 that though, because that's the bad news at the end. 0:16:37.640 --> 0:16:40.200 This is the bad news in the middle. Uh, China 0:16:40.240 --> 0:16:42.720 and Japan, for instance, UM each owned more than a 0:16:42.720 --> 0:16:46.760 trillion dollars in Treasury securities as of July last year, 0:16:48.240 --> 0:16:51.040 So a lot of people borrow money from the United 0:16:51.080 --> 0:16:54.560 States at pretty low rates. I think it's it's worth 0:16:54.680 --> 0:16:59.920 explaining again, like a Treasury bond, is you chuck going 0:17:00.080 --> 0:17:02.920 to buy going to the U. S. Government saying here, 0:17:02.920 --> 0:17:05.720 I'll give you some money. You give me a promisory 0:17:05.800 --> 0:17:08.240 note that says you'll repay it with a little bit 0:17:08.320 --> 0:17:11.520 extra big right at the at the end when this 0:17:11.560 --> 0:17:14.480 thing matures, and the government says, thanks, we're gonna take 0:17:14.520 --> 0:17:16.480 this money and we're going to use it to pay 0:17:16.480 --> 0:17:20.080 our bills. Because Congress is going over and saying, yes, 0:17:20.160 --> 0:17:22.240 we want to keep our national parks open, and we 0:17:22.320 --> 0:17:28.760 want to um, we want to fund um like security whatever, um. 0:17:28.800 --> 0:17:31.000 And we have bills to pay. So thanks for the money. 0:17:31.160 --> 0:17:33.440 We're gonna pay the bills because that's what Treasury does. 0:17:33.560 --> 0:17:36.159 Congress spend the money. Treasury pays the money, and if 0:17:36.160 --> 0:17:39.320 you're under that ceiling, then it's it's it's all good. Yeah, 0:17:39.320 --> 0:17:41.000 it's fine, just figure out a way to pay the bills. 0:17:41.000 --> 0:17:43.480 And it's just like a big company. And Treasury also 0:17:43.520 --> 0:17:46.160 has more than one financial security. They have all sorts 0:17:46.160 --> 0:17:48.879 of ones that different that mature at different times and 0:17:48.920 --> 0:17:52.920 all that, and um, they do a pretty good job 0:17:52.960 --> 0:17:57.000 of figuring out how to raise money. But the problem 0:17:57.119 --> 0:18:01.160 is for every Treasury bill that they sell, Chuck, that's 0:18:01.680 --> 0:18:04.600 that much more in debt. The federal government has just 0:18:04.640 --> 0:18:08.240 gone yeah, okay with the debt ceiling. Like you said, 0:18:08.440 --> 0:18:12.560 there is a certain limit to the amount of outstanding 0:18:12.600 --> 0:18:15.920 debt the Treasury Department can issue, and it's just like 0:18:16.040 --> 0:18:20.040 a credit card limit to an extent. Yeah, there's there's 0:18:20.080 --> 0:18:23.439 one pretty big difference is um. But it is a 0:18:23.440 --> 0:18:25.240 helpful way to think about it because most people have 0:18:25.280 --> 0:18:27.879 credit cards. But the bank sets your credit card limit 0:18:27.880 --> 0:18:31.439 because they say, Josh, you know you're risky as a spender. 0:18:31.440 --> 0:18:32.719 We don't want to give you a credit card more 0:18:32.760 --> 0:18:35.200 than like Tim Grant. Let's say, yeah, so the bank 0:18:35.359 --> 0:18:37.840 puts the cap on it. There. Um. On the other 0:18:37.840 --> 0:18:42.120 side of the coin, foreign governments that by treasury securities 0:18:42.320 --> 0:18:45.960 are like, I'll take all you got basically, so it's 0:18:46.000 --> 0:18:49.320 a reliable investment. And the credit limit is imposed by 0:18:49.320 --> 0:18:51.880 the borrow instead of the lender. Right, that's the big 0:18:51.920 --> 0:18:55.080 difference with with your credit card. It's the person lending 0:18:55.080 --> 0:18:57.960 you the money that wants to say that that says no, 0:18:58.119 --> 0:19:02.639 you can't borrow anymore. With the debt ceiling, it's us 0:19:02.680 --> 0:19:05.679 saying no, we can't. We can't go borrow anymore. We 0:19:05.760 --> 0:19:07.920 could issue as much as we wanted, and people would 0:19:07.920 --> 0:19:12.440 buy teabills all day long because they're so safe. That's right, 0:19:12.480 --> 0:19:15.320 supposedly or at the moment they are. All right, you 0:19:15.320 --> 0:19:16.760 want to talk about the history a little bit, Well, 0:19:16.800 --> 0:19:19.320 hold one, before we talk history, let's do a message 0:19:19.320 --> 0:19:28.400 break real quick, okay, And now we are talking about 0:19:28.440 --> 0:19:30.640 the history of the death ceiling, right. I think that's 0:19:30.640 --> 0:19:34.879 where we left off. Back in the day, UM, Congress 0:19:35.000 --> 0:19:37.639 used to be a little tighter with this, a lot tighter. 0:19:37.680 --> 0:19:42.320 In fact, we could not sell securities without explicit approval. 0:19:43.280 --> 0:19:47.240 UH Treasury wanted to borrow some money, so Congress would say, Hey, 0:19:47.600 --> 0:19:50.240 what kind of security should we sell? Large or small? 0:19:50.359 --> 0:19:53.440 What should the interest rate be? Um? How many should 0:19:53.440 --> 0:19:55.439 we sell? And they kind of worked it out that 0:19:55.480 --> 0:20:00.320 way up until UH war In War Revenue Act of 0:20:02.200 --> 0:20:04.359 basically said, you know what, in times of war, we 0:20:04.400 --> 0:20:07.720 need to loosen the chains a little bit, and let's 0:20:07.720 --> 0:20:10.040 say we can borrow up to five hundred million dollars 0:20:10.359 --> 0:20:14.560 by some of these securities to fund the Spanish American War, right, 0:20:15.160 --> 0:20:17.359 And then after that they were like, okay, that worked, 0:20:17.400 --> 0:20:20.359 but let's just leave that be. And then there was 0:20:20.400 --> 0:20:23.399 World War One, and there was the First and Second 0:20:23.480 --> 0:20:26.919 Liberty Bonds Acts, which basically did the same thing to 0:20:26.960 --> 0:20:30.119 help fund World War One, and it worked really well. 0:20:30.160 --> 0:20:34.560 And the secretaries of the Treasury, um, I think Andrew 0:20:35.119 --> 0:20:40.240 Carnegie Mellon. Andrew Mellon, Yeah, you can understand why I 0:20:40.280 --> 0:20:43.720 would be confused there, um. And Henry Morgan Thou later 0:20:43.840 --> 0:20:46.840 on in the nineteen twenties and thirties basically said why 0:20:46.920 --> 0:20:49.280 not just do this to fund the government as as 0:20:49.280 --> 0:20:52.520 a whole instead of just in times of war? And 0:20:52.720 --> 0:20:54.640 now today, if you could go back and sit down 0:20:54.720 --> 0:20:58.520 with him, you could say, because it gets out of 0:20:58.560 --> 0:21:02.199 control when you do, because it's right. Um. But they 0:21:02.320 --> 0:21:05.840 got uh was it Franklin? Yeah, fdr Yeah, they got 0:21:06.000 --> 0:21:09.680 Roosevelt on on board, and they got Congress to pass 0:21:09.840 --> 0:21:13.800 this for the first time ever, an aggregate debt limit, 0:21:13.960 --> 0:21:17.160 which is all the debts that the U s ode 0:21:17.760 --> 0:21:21.119 as long as it was beneath a certain amount um. 0:21:21.600 --> 0:21:24.479 The Treasury could do whatever it wanted to pay its 0:21:24.560 --> 0:21:26.560 bills as long as it didn't need to borrow any 0:21:26.600 --> 0:21:28.520 more than that. And that was the first time that 0:21:28.640 --> 0:21:31.840 a debt ceiling was ever set in nine I think, yeah, 0:21:31.920 --> 0:21:34.320 thirty nine, and that was It's pretty similar to kind 0:21:34.320 --> 0:21:37.439 of the debt ceiling that we have today. Not too different. Uh, 0:21:38.040 --> 0:21:41.000 Congress approved spending. Treasury figures out how to pay for 0:21:41.080 --> 0:21:43.080 it all. As long as you're under that, it's all good. 0:21:43.600 --> 0:21:45.320 The problem is when you bump up against it, like 0:21:45.440 --> 0:21:49.600 we've been doing over and over again lately, it seems like, yeah, so, 0:21:50.520 --> 0:21:52.960 like you said, that is a problem, you just vote 0:21:53.000 --> 0:21:56.840 to raise it. Yes, and again. This has been pretty routine. 0:21:57.119 --> 0:22:02.120 You know, a hundred times since the the the nineteen thirties, 0:22:04.040 --> 0:22:07.280 a hundred times these things been lifted. Um, and you 0:22:07.440 --> 0:22:10.600 just say, okay, well, just go issue some more debt. 0:22:10.920 --> 0:22:13.560 People want the debt, people want to lend us money, 0:22:14.240 --> 0:22:16.800 So go issue some more debt and we can keep 0:22:16.840 --> 0:22:19.159 paying our bills. Because here's the thing with the debt ceiling. 0:22:21.080 --> 0:22:23.200 When you raise the debt ceiling, a lot of people 0:22:23.240 --> 0:22:25.359 are like, well, if you don't raise the debt ceiling, 0:22:25.400 --> 0:22:30.760 it curbs spending. That's true. Indirectly, what the Treasury is 0:22:30.800 --> 0:22:34.760 doing is paying for stuff that we've already received on credit, 0:22:35.359 --> 0:22:38.160 whether it's you know, meals for soldiers from a private 0:22:38.240 --> 0:22:45.360 contractor to you know, a bunch of like Boeing jets, whatever, 0:22:45.800 --> 0:22:48.520 We've already received these things, and now Treasury has to pay. 0:22:49.400 --> 0:22:53.400 So if if you don't extend the debt ceiling, then 0:22:53.480 --> 0:22:57.359 you're defaulting on uh payments. You have to make bills, 0:22:57.400 --> 0:23:00.440 you have to pay, just like you your credit card exactly. 0:23:00.680 --> 0:23:02.840 And that's not good. And it's kind of the same 0:23:02.880 --> 0:23:06.760 thing happens really if we default. Uh, Well, here's what happens. 0:23:06.800 --> 0:23:08.520 If we don't raise the debt ceiling and we are 0:23:08.600 --> 0:23:14.840 in danger of defaulting, we uh defaulting would basically start 0:23:14.960 --> 0:23:19.200 raising all other interest rates across the board, well, the 0:23:19.320 --> 0:23:23.320 Marke loan rates, UH, basically anything your average Joe would 0:23:23.320 --> 0:23:25.399 go and get alone for your your rates are going 0:23:25.440 --> 0:23:27.240 to go up, right, And the reason why is because 0:23:27.320 --> 0:23:31.440