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WH: Debt Limit Showdown May Hurt States09/17 06:19

   The White House is warning state and local governments about severe cuts to 
disaster relief, Medicaid, infrastructure grants. school money and other 
programs if Congress fails to raise the U.S. debt limit.

   (AP) -- The White House is warning state and local governments about severe 
cuts to disaster relief, Medicaid, infrastructure grants. school money and 
other programs if Congress fails to raise the U.S. debt limit.

   A fact sheet for state and local officials that was obtained by The 
Associated Press is an attempt to ratchet up the public pressure on Senate 
Republican leader Mitch McConnell. President Joe Biden has insisted so far on 
bipartisan backing to increase the cap on debt that was almost entirely accrued 
before he took office, but McConnell, R-Ky., has been unmoved and has 
repeatedly said that Democrats must act on their own.

   The Treasury Department has engaged in extraordinary measures to keep the 
government running after the suspended debt limit was reinstated in August at a 
level of $22 trillion, about $6 trillion less than current total debt load. 
Treasury's extraordinary measures will be exhausted by October, creating the 
potential for default.

   The debt limit is the amount of money Congress allows the Treasury to borrow 
to keep the government running.

   It was suspended three times during the Trump administration and has been 
lifted dozens of times since 1960. Created at the start of World War I so 
Congress would no longer need to approve each bond issuance, the debt limit has 
evolved into a political weapon as borrowing has sharply escalated over the 
past two decades.

   With the total debt standing at $28.4 trillion, the government would be 
forced to cut deeply into programs unless the restrictions on borrowing are 
lifted or suspended. The risk of a recession and turmoil in the financial 
market would make it harder for states and cities to borrow, while also playing 
havoc with public pension investments.

   The Biden administration's fact sheet makes the case that the pain would be 
spread among the states because many programs rely on federal dollars. The 
government's ability to respond to natural disasters such as hurricanes, 
earthquakes or wildfires would be curtailed.

   States would face severe Medicaid shortfalls because the federal government 
covers two-thirds of the costs. About 20% of Americans get their health 
insurance through Medicaid and the Children's Health Insurance Program.

   Roughly $100 billion in infrastructure grants for highways, airports and 
public transit would be jeopardized. The more than $50 billion for special 
education, school districts serving poorer students and other programs would 
also be threatened, as would $30 billion in food assistance and $10 billion for 
public health.

 
 
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