By Scott Krisiloff
Scott Krisiloff runs Avondale Asset Management in Los Angeles, California. You can find much more of his ginsu sharp commentary at avondaleam.com.
If Congress doesn’t adjust the debt ceiling by October 17th, many have (rightly) noted that a debt default is not a necessity. That’s because depending on how Treasury prioritizes cash flows, there should still be more than enough money coming into the Federal Government to service interest payments on existing debt.
In order to visualize the expenditure waterfall in a way that is a little more intuitive for a financial analyst, below is a mock income statement put together using the President’s 2014 budget proposal.
On $3 Trillion in revenue, the US Government spends $2.3 T on mandatory programs as defined by the Budget Enforcement Act. The majority of these are social welfare programs including Social Security, Medicare and Medicaid.
That leaves $725 B for interest expense, which works out to an interest coverage ratioRead More »from What Do the Federal Government’s Books Look Like?