The debt ceiling has been a contentious point in Congress for several years, and the current government shutdown might bump into the current budget crisis in only a couple of weeks. The debt ceiling has never been breached, and has always been raised before the U.S. defaulted on their debts. While the Republicans are currently threatening to not increase the debt ceiling, in the past Democrats have done the same. So, while this is a political issue, it is also a very important economic issue that relates to monetary policy.
Questions you might answer:
- Think about the ability of the central bank to keep interest rates where they are at–whether you agree with their current level or not–given the deficits that the U.S. government has been running during the past several years. Bernanke has pointed this out to Congress on multiple occasions, as recently as two weeks ago.
- If the debt ceiling is breached, what could the Treasury do in response? JMU’s Barkley Rosser has pointed out some options for the President and Treasury. Would these options necessarily soothe markets?
- What happened to the nation’s credit rating the last time we approached the debt ceiling? What might happen in the near term? What are CEO’s saying (a second link)? What does the credit rating have to do with our interest rates? Our yield curve?
Do not necessarily limit yourself to these topics, and not necessarily these articles. You should read all or most of them and formulate a fact-based opinion that you can use to argue your point. I am not grading you on the correctness of your opinion, only whether or not it is convincing based on the facts you display. (Note: pointing out that pundits like Paul Krugman or Charles Krauthammer agree with you is not a fact.)