Battles over the debt ceiling cripple the economy
As of this writing (November 21, 2022), Republicans are poised to take over the House of Representatives next year, and one of the weapons they are expected to use to scare people with is the federal debt ceiling. If the debt ceiling is not raised, all sorts of economic havoc could result, based on the failure of the government to pay its bills, and even go into default after a short lag time. A default would send shock waves throughout the global economy, and make the U.S.—both government and the private sector—a less desirable entity to do business with.
Just the threat of a default makes other countries jittery—when, they ask themselves, will the U.S. actually default because of political wrangling? Recurring battles over the debt ceiling weaken our position versus the developing BRICS countries (Brazil, Russia, India, China, and South Africa) as well as established economies in the West.
What seems scary about the “national debt” and deficit spending
The “national debt” consists principally of the total of all the Treasury bonds, Treasury bills, and Treasury notes held by entities such as yourself, if you happen to hold a U.S. savings bond, as well as by the U.S. government itself. Currently the breakdown among all bondholders is about 36% held by American individuals and companies, 39% held by the U.S. federal government (used for such things as the Social Security Trust Fund, Medicare, and federal pensions) and 25% held by foreign investors such as China and Japan. The latter proportion strongly suggests that the U.S. government cannot be “held hostage” by foreign bond holders.