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Today's Presentation on the Debt Ceiling
Earlier today, Jason Schenker gave a talk to the Texas Business Leadership Council about risks associated with the debt ceiling.
Slides from this presentation are below.
The TBLC is a nonpartisan Texas affiliate of the Business Roundtable. We are the 100 CEOs in the state of Texas who advise federal and state elected officials of both parties on issues that go beyond party. I have been a TBLC member since 2014, and I am on the Executive Committee.
Key points of my nonpartisan talk were incorporated into a letter to members of both parties of the Texas delegation in Congress.
The highlights?
The current record level of U.S. government debt above $31 trillion is concerning. But a failure to raise the debt ceiling and an associated debt default would worsen the U.S. debt situation by lowering the U.S. government's perceived reliability as a debt issuer.
A lowered credit rating and lower perceived reliability would drive up the cost to service the debt of the U.S. government at a time when interest rates have already risen due to monetary tightening to combat inflation.
A U.S. government debt default and credit downgrade would also negatively impact the cost of capital paid by businesses and individuals. With interest rates high and consumer debt at a record $17 trillion, this is a significant risk for consumers.
We encourage our legislators of both parties to find a way to come to terms as soon as possible to avoid a debt default and the potential adverse economic knock-on effects that would increase the costs to service government debt, operate businesses, and service a record level of consumer debt.
There are many ways this negotiation could be reached, but we fundamentally believe that the worst outcome would be one that results in a debt default.
While Democrat and Republican perspectives on spending and taxes will not change in the next two weeks, the U.S. credit rating certainly could.
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