Call Our Offices
Your Money.
Your Life.
Your Way.
What Happens if the Debt Ceiling is Not Raised?
Shared by Strong Valley on October 5, 2021
What Happens if the Debt Ceiling is Not Raised?
Image of a stop watch for the in-brief section heading
Here's a quick look at what's in this article:

The latest mess out of Washington is the fight to increase the federal debt ceiling. If this isn’t resolved, some fear catastrophe for the markets. Long-term financial success dictates that we learn to manage headline generated waves in the market and recognize which ones truly matter and which ones are just ripples under our boat. There’s info in this article that explains the concerns and might help you relax.

Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

The latest mess out of Washington is the fight to increase the federal debt ceiling. If this isn’t resolved, some fear catastrophe for the markets. Relax. Stocks may dip at first, but a market debacle won’t happen.

The debt ceiling fiasco will come and go, market volatility will likely increase and we have to manage our emotions and follow our investment discipline. There will always be drama in D.C. or unexpected announcements on Wall Street.

Headline Generated Waves

Long-term financial success dictates that we learn to manage headline generated waves in the market and recognize which ones truly matter and which are just ripples under our boat.  Remember, some ripples even offer potential opportunities.

The politicians in D.C. seem to generate drama regarding just about everything these days. While many of the laws that state legislatures and Congress pass are in fact important, let’s take a closer look at the debt ceiling, which is a special situation.

For the past few months, discussions of the debt ceiling have slowly crowded out other stories on the newswires. That is a serious issue, and we certainly have opinions about it, but this article is devoted to helping you understand the market more than politics.

The Debt Ceiling Explained

First things first, the debt ceiling does not give Congress the ability to spend more money. It does not hand over a blank check for them to do whatever they please.

So, if the debt ceiling does not allow Congress to spend more money, then what does it do? In the simplest terms, it approves the check to be written to pay for the spending that lawmakers already approved.

Imagine if you receive a credit card with a limit of $5,000, and then charge $5,000 on it. When the bill comes in the mail, you decide if you’ll pay it off or not. That’s essentially what Congress is doing, determining: whether they will pay the bill to cover the spending that the House, Senate and president already signed off on.

Seems fairly simple doesn’t it? Well, like most things that happen in Washington, both parties attempt to latch special spending items to bills that raise the debt ceiling. The important discussion of how much the U.S. government spends should ideally occur when voting on the actual budget. Without an agreement on this question, we could see a government shutdown.

22 Times Since 1976

Here is a very important thing to remember: if the debt ceiling is not raised and the government does shut down, it wouldn’t be the first time. In fact, it wouldn’t even be the twentieth time.

Since 1976 the government has been shut down 22 times, the last being between December 22, 2018 until January 25, 2019 (35 days). If this happens, then yes, the stock market will likely react negatively.

But we will survive and there will be a light at the end of the tunnel, the question is how long it takes to reach there.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results or even estimates of actual returns a client may achieve. This information is designed to provide general information on the subjects covered. Consult your financial professional before making any investment decision. Opinions and estimates offered are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Please see other important disclosures related to

Your turn – What would you like to know about What Happens if the Debt Ceiling is Not Raised??

Strong Valley wants to provide useful and meaningful information to our clients, to our professional network, and to the broader community of people we serve. We’d love to hear your questions about What Happens if the Debt Ceiling is Not Raised? or about any other topics you care about. You can call our office directly, or use the contact form below to send us your questions and/or suggestions.  And if you found the information helpful or entertaining, we hope you'll share the Strong Valley story with others.

We love to hear your questions, ideas, and feedback!

  • This field is for validation purposes and should be left unchanged.
Copyright © 2024 Strong Valley Wealth & Pension, LLC
Investment advice offered through Integrated Partners, doing business as Strong Valley Wealth & Pension, a registered investment advisor. The information on this website has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Registration as an Investment Adviser does not imply a certain level of skill or training. Strong Valley Wealth & Pension, LLC offers some securities through M.S. Howells & Co. Member FINRA/SIPC. M.S. Howells & Co. is not affiliated with Strong Valley Wealth & Pension.
The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.