Machine Learning

At $28 trillion dollars, The US government does not collect enough in taxes to directly pay for its spending with cash on hand, so it must take on debt and sell bonds. Typical buyers of bonds are institutional investors (like pension funds), foreign countries (often sovereign wealth funds or financial institutions serving foreign nationals), and individuals (usually through mutual funds and 401(k) accounts). If the government defaults or comes close to defaulting, credit rating agencies would likely downgrade the rating of Treasury bonds. In 2011, the mere threat of default prompted the credit rating agency Standard & Poor’s to downgrade the United States from its AAA rating to AA+ for the first time in 70 years. Default would mean the cost of borrowing for the US government would increase, perhaps dramatically. And when its more expensive for the government to borrow, it will be more expensive for individuals to borrow. For every 1% decrease in GDP growth, there is roughly an 0.5% increase in the unem