In just over a month the U.S. will reach its credit limit if members of Congress do not vote to raise the $14.3 debt ceiling. Investors and executives on Wall Street are secretly starting to worry, as Politico's Ben White reports in his daily Morning Money note.
"Wall Street executives and their lobbyists have been meeting quietly with members of Congress -- especially reluctant House GOP freshmen -- to urge that they vote in favor of raising the $14.29 trillion debt limit as quickly as possible and not risk a huge spike in interest rates, a possible collapse in equity markets and a rash of bank failures," writes White.
After years of deficit spending, the time has finally come for the country to get serious about its mounting debt and yearly budget deficits. This year the U.S. will rack up a $1.5 trillion bill, or 9.8% of gross domestic product, according to the Congressional Budget Office.
The big question these days is how we're actually going to work our way out of the red.
Long-time investment manager Jeff Matthews has a solution: Congress should enact a balanced-budget policy. If the budget is not balanced each year, then cuts would be the mandate.
"I think that takes the onus off the individual senators and congressmen who don't want to see their particular pet projects cut, and it makes it more impersonal, which I think makes it easier to go down," he tells Henry Blodget in the accompanying clip. He acknowledges that such a measure is easy for him to propose while sitting on the sidelines of the debate.
Despite the fact that such a measure would be absolutely brutal on spending, Matthews does not consider this a "death scenario," as some, such as the New York Times devout Keynesian Paul Krugman, have proclaimed.
"We've had a tremendously powerful recovery and I think now is a good time so start thinking about this," says Matthews, pointing to record corporate profits and a stock market that has come roaring back from its 2009 lows.
Of course, with tensions hot and high in Washington over how to deal with our debt, Matthews does not see any real solutions coming anytime soon.
Until there is a real crisis, he expects our elected officials to deal with our debt like "trying to patch" up an old "broken car."
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