House Speaker McCarthy and the far-right members of his caucus have made it clear they would not approve an increase in the debt limit until they get huge expenditure cuts from the federal budget. They also believe a shutdown would be beneficial for the nation.

The new Republican Speaker of the House, Kevin McCarthy, and his far-right caucus are going to shut down the U.S. Government. Investors should be prepared for it and, worse - a possible debt default.

The last shutdown took place on December 22^, 2018. the federal government suffered its longest shutdown - in history.

The U.S. government has now shut down a total of 21 times since Congress introduced the Congressional Budget and Impoundment Control Act, which established the federal budget process in 1976. Half of those shutdowns occurred over a weekend.

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Marc Goldwein, senior policy director of the Committee for a Responsible Federal Budget – a bipartisan, nonprofit organization that educates the public on fiscal policy issues – told Fox News.

"I call them 'fake shutdowns,'"

"Most shutdowns occur over the course of a weekend. We're talking days or weeks – not months."

But there have been a handful of lengthy U.S. government shutdowns. According to data from the Congressional Research Service (CRS), seven shutdowns in the past four decades lasted more than ten days, including the confrontation between Trump, his Republican congressional caucus, and Democrats back in 2018.

On January 12, the government reached its 22-day mark, breaking the record for the longest shutdown in U.S. history. The previous record-holder occurred during the Clinton administration in the winter of 1995 to 1996 when former President Bill Clinton and the Republican Congress were at odds and shut the government down for a total of 21 days. The third occurred during the Obama administration in 2013. A stalemate between the House and Senate led to a 16-day hiatus.

A government shutdown this time around could last much longer than 22 days, given the animosity of the far-right, who effectively have speaker McCarthy by the short hairs. Anyone of them could react to his bringing a vote to the floor of Congress; a bill to raise the U.S. debt ceiling could move to vacate his position as Speaker of the House. Worse, they appear to be willing to prevent the raising of the debt ceiling that would result in the United States' credit rating being downgraded for the second time in the history of our country.

The first downgrade in the U.S. credit rating took place in 2011 when Obama and Congress didn't raise the debt limit fast enough. 

The next shutdown could come in August or early September, depending on the IRS tax collections.

In a letter to House Speaker Kevin McCarthy (R-CA), Treasury Secretary Janet Yellen notified Congress that the U.S. would reach its statutory debt limit next Thursday, January 20, 2023. She also warned that the Treasury Department would begin "taking certain extraordinary measures to prevent the United States from defaulting on its obligations."

According to Secretary Yellen, the Treasury "is not currently able" to estimate how long those emergency actions will allow the U.S. to pay for government obligations.

While Yell did affirm…

"It is unlikely that cash and extraordinary measures will be exhausted before early June."

"I respectfully urge Congress to act promptly to protect the full faith and credit of the United States."

Friday's notification from Yellen effectively starts a clock counting down how long the federal government can continue to make interest payments on its debt.

The so-called extraordinary measures available to the Treasury secretary can free up billions of dollars that have been technically committed to other purposes but have yet to be spent.

This can extend the clock for weeks or months while Congress hashes out a bill to raise the borrowing limit.

 A senior White House official told CNBC that the White House plans to try to cut a deal with Congress to raise the federal debt ceiling after the mid-April deadline for income tax return filings. The official said the White House would not have enough details to negotiate a deal until it sees the level of income tax receipts.

But the debate over raising the debt ceiling is expected to be particularly fraught this year in light of the dominance of the far-right members in the new Republican 4-seat majority in the House of Representatives.

McCarthy has made little secret of the fact that Republicans intend to demand massive spending cuts to the federal budget in exchange for approving an increase in the debt ceiling.

President Biden and the Democrat members of the House will attempt to persuade 17 of the 18 GOP members of Congress in districts that Biden won in 2020 to join in a "discharge petition," a legislative maneuver in the House that would allow a group of democrats and republicans to bring the question of the raising the debt ceiling to the floor of the House of Representatives for a vote.

If the effort to bring and raise the debt ceiling fails to be cured by a "discharge petition," the United States could trigger a worldwide financial meltdown as U.S banks, financial institutions, and stock markets would be forced to shut down, and would at the same time be catastrophic for the U.S. economy and its credit rating.

We could see the major stock indexes' futures fall 30%, 40% even 60% in short order and trigger a global financial market meltdown that would make the 2008-2009 economic meltdown look like a hiccup. Interest rates would spiral up to 10%, 20%, and 30% in a blink of an eye. The food lines we would then see would be tens of miles long, making those that formed during the pandemic look tiny.

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                       What Would Happen If the U.S. Defaults for the First Time in History?