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US Debt Ceiling
Summary: At the very end of last year, the US was heading towards a "fiscal cliff", and although a deal was agreed, the Economic Research Council pointed out in our first Chart of the Week of 2013 that the debt ceiling still loomed ahead. Fast forward nine months, and history is repeating itself, except this time, a budget deal has not been agreed, causing most government services to shut down (including, frustratingly for us, the Bureau of Economic Analysis website). While this drama is playing out, the debt ceiling is also fast approaching crisis point.

What does the chart show? The red line shows the daily total US public debt (government debt held by the public and intragovernmental holdings) in trillions of dollars since January 2006. The black line shows the debt ceiling (the self-imposed limit on how much the government is allowed to borrow), also in trillions of dollars. The debt limit was temporarily suspended between February and May of this year, shown by the dotted black line.

Why is the chart interesting?  Back in January, we reported that the US had roughly two months to extend the debt limit in some way. In February, it was temporarily suspended, before being set to the current debt level in May. Since May, the total public debt has been right at the limit (for possibly the longest period of time in recent history). However, government finances are now at a point where the debt ceiling must again be extended before 17th October, or the US will be forced to default on some of its debt for the first time. This would be an economic disaster, probably on a global scale. At the beginning of the year, we didn't doubt that the ceiling would be lifted. It will probably be lifted again. However, with all attention on the current budget stand-off, it is hard to feel so confident this time around.

The ERC Chart of the Week is updated every Wednesday.

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Although Q2 GDP growth remained unchanged at 0.7% after last week's revision, Q1 growth was revised up to 0.4% and Q4 was revised down to -0.3%, so there was plenty of movement in our Clash of the Titans economic prediction competition.
Our top five currently looks like this:
Pos Name Score*
1. Duncan Stewart 14 (1.3)
2. James Gordon 14 (40.7)
3. Yasser Dallal 15 (8.7)
4. Jeremy Beckwith 15 (42.1)
5. Anoushka Shepherd 15 (43.7)
Click here to see the rest of the table.
We are also very excited to announce the line-up for this year's Clash of the Titans event, supported by PwC, to be held on 10th December.  You can read all about it, and book Early Bird tickets for just £15, on our website.

 Next Week: 
 Wednesday 9th October
18:30 at the Royal Overseas League, London

Whose Theories Can Best Deliver Growth and Recovery in the UK:
 Hayek or Keynes?
With Michael Kitson (Cambridge) representing Keynes,
and Guy Fraser-Sampson (Cass Business School) representing Hayek
There are only a handful of tickets remaining for this event, so please book quickly to avoid disappointment.
For tickets and more information visit the ERC website.


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