Stephen Moore: The debt ceiling is a federal budget fire alarm and Trump should embrace it

You may have missed it amid your New Year’s Eve revelry, but the United States Congress is now, as of the stroke of midnight on Jan.1, officially in violation of the federal debt limit.

 That’s because the debt ceiling, which sets the total dollar amount the federal government is allowed to borrow, had been suspended until the beginning of 2025. With the new year came its reinstatement, and guess what: The nation’s current outstanding debt is already nearly $4 trillion over the legal limit of $31.4 trillion.If private money managers were acting like this, we’d probably put them in jail for financial fraud.

 Technically, Congress right now is prohibited from issuing any new debt — meaning it can only spend, each day, what the federal government brings in.So why is Congress able to keep spending like giddy kids in a candy store?  Because the president has authority to invoke what are called  “extraordinary measures” to juggle money around and extract dollars from trust funds (that must be repaid) to cover the government’s bills, even as the debt continues to soar. That will give soon-to-be President Trump just three to five months of wiggle room — and then, no amount of accounting gimmicks will further delay the drop-dead date when federal borrowing must stop. At that point, only the most urgent programs will get funded, while the rest of the government shuts down.

For economists and investors, the big worry is that as the date approaches, the bond market goes haywire over the threat of bonds not being paid, which would skyrocket interest rates on federal bonds — and make our debt crisis even scarier. The sliver of good news is that a debt default is extremely unlikely — even though the media keeps spooking voters with that boogeyman. If you own government bonds, they will be paid, and on time. What is likely, however, is for Congress’ spending proclivities to trigger a financial crisis, or runaway inflation, due to its rivers of...