Treasury Dept. Takes 'Extraordinary Measures' Ahead of Debt Limit Deadline - What Are They?
How do you feel about the national debt?
What’s the story?
- The Treasury Dept. announced Sunday that it has begun using the “extraordinary measures” at its disposal to fulfill the federal government’s financial obligations and prevent a default after it reached the end of the debt limit suspension on Sunday, August 1st.
- Treasury Secretary Janet Yellen wrote a letter to congressional leadership warning that failing to raise the debt limit by the time the extraordinary measures are exhausted in the next few months “would cause irreparable harm to the U.S. economy and the livelihoods of all Americans.” She also noted:
“The period of time that extraordinary measures may last is subject to considerable uncertainty due to a variety of factors, including the challenges of forecasting the payments and receipts of the U.S. government months into the future, exacerbated by the heightened uncertainty in payments and receipts related to the economic impact of the pandemic. Given this, Treasury is not able to currently provide a specific estimate of how long extraordinary measures will last. However, there are scenarios in which cash and extraordinary measures could be exhausted soon after Congress returns from recess.”
- The Congressional Budget Office (CBO) projects that the Treasury’s extraordinary measures will likely prevent the federal government from running out of cash until October or November. However, it also noted that the cash flows of inbound federal tax revenue and outgoing spending could alter that timeline if they “differ noticeably from CBO’s projections” and that:
“Therefore, the extraordinary measures could be exhausted, and the Treasury could run out of cash, either earlier or later than CBO projects.”
What are the extraordinary measures the Treasury uses?
- The Treasury has used all four of the extraordinary measures at its disposal to avoid defaulting on the U.S. government’s obligations when Congress has debated increasing the debt limit in recent years. Here’s a look at accounting tools available to the Treasury:
- Suspending sales of state and local securities: Under normal circumstances, the Treasury issues government securities (things like bonds that give the gov't cash that must be repaid with interest at a later date) which count against the debt limit to state and local governments so that they can properly invest the proceeds of tax exempt bonds. The federal government is under no obligation to issue those securities, and by not doing so it slows down the rate at which it accumulates debt, usually by $4 to $17 billion monthly.
- G Fund: This government account is invested entirely in securities that mature in one day before being reinvested as part of the Federal Employees’ Retirement System Thrift Savings Plan. Congress has given the Treasury the ability to stop reinvesting if doing so would exceed the debt limit. This doesn’t actually impact federal employee’s investments, which are protected because the G Fund is made whole plus interest once the debt limit impasse ends. The G Fund’s balance is around $150 billion.
- Exchange Stabilization Fund: Much like the G Fund, the Exchange Stabilization Fund (ESF) account is invested entirely in one-day securities in order to allow the Treasury to buy or sell foreign currencies. The Treasury isn’t required to invest the ESF, so it can stop investing its balance of U.S. dollars — about $22 billion — at its discretion.
- Civil Service Retirement and Disability Fund: This is one of the largest federal pension funds, and by declaring a "debt issuance suspension period," the Treasury is able to redeem existing investments in the fund and stop making new investments. That can only occur once the Treasury has determined that continuing normal operations would cause the debt limit to be exceeded. Benefit payments would continue to go out as normal as long as extraordinary measures haven’t been exhausted, and once the debt limit is raised the CSRDF is required to be made whole with all money being returned with interest.
How will Congress raise the debt limit?
- It’s unclear how Congress will go about raising the debt limit on this occasion. The most recent debt limit suspension occurred with the adoption of the Bipartisan Budget Act in 2019 and ran through July 31, 2021.
- Democrats could attach an increase of the debt limit to the upcoming budget resolution with reconciliation instructions for their $3.5 trillion infrastructure package, enabling them to pass it along party-lines.
- Alternatively, they may pursue a debt limit hike in a standalone package, which could set up a showdown with Republicans who would have to provide at least 10 votes in the Senate to allow its passage.
- Senate Republicans have said they don’t intend to support Democrats in a standalone debt limit increase, and encouraged them to include the debt limit hike in their budget resolution for reconciliation that will be enacted ahead of Democrats’ $3.5 trillion infrastructure package.
- Another possible path to the enactment of a debt limit increase could come when Congress confronts the prospect of a government shutdown at the end of September. None of the 12 annual appropriations bills to fund the government in fiscal year 2022, which begins October 1st, have been enacted and with Congress focused on the two-track infrastructure process it’s likely that lawmakers will need to turn to yet another continuing resolution (CR) to avert a shutdown. A CR would also require bipartisan buy-in in the Senate to avoid a shutdown.
- The debt limit has been raised by Congress 79 times since 1960, in which time the national debt has grown from $286 billion to more than $28 trillion today.
- The U.S. ran the largest budget deficit in history in FY2020 at more than $3.1 trillion amid increased spending due to the coronavirus (COVID-19) pandemic, which the CBO has projected may be equaled or exceeded in FY2021 based on spending trends.
— Eric Revell
(Photo Credit: iStock.com / Douglas Rissing)
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Republicans need to get out of the way and stop obstructing our recovery from the economic devastation that COVID has caused for so many Americans.
Our greatest national debt is due to EXCESSIVE MILITARY SPENDING! (+65% of discretionary spending!). Our priorities MUST change to investments in TRUE security: social and environmental programs for example.
Maybe we can eliminate congressional salaries until the debt is gone.
The debt would be a lot lower. Trump's 4 years did so much damage! Taxes, trips ect...
Since I am not an "accountant" and may not understand all of this business, I do know that this country needs to take care of the things that affect us all directly. We should have had our eyes on this long ago. Yes, we have a huge deficit but I believe this has built up over years and we can no longer ignore it. Get it done.
IMO The feds are private company allowed to print money as needed and without limit. The game then is to charge the US government to pay back monies basically to itself to maintain a rather bogus accounting scheme. The US is suppling an ever increasing demand for dollars all over the world. Make no mistake the US is funding the world, capitalism requires that expanding market. Inflation is another word for too many people with money raising demand on limited supply and the prices go up. Maybe this is why republicans like to put money only in the hands of the wealthy to limit demand and trickle down and don't like raising the minimum wage. We saw them complain the stimulus payments is causing inflation because middle and poor Americans were spending and according to them you don't put money in the hands of middle and poor if they don't earn it..
It amazes me that people still believe the democRATs are the party of the people when it's the democRATs who always raise taxes, look for new things to tax, like the failed soda tax in Chicago, and democRATs always spend the country into outrageous debt!
If we spend to help the less fortunate I could give a rats a** about the national debt!!
If the clowns in Washington had to live on a budget like the rest of us …
It’s all Monopoly money now. Most, if not all, of these snakes will be dead, or out of office when the economic disaster hits the country. Maybe it’s time we lived through Zimbabwe-style inflation where you needed a wheelbarrow full of cash to by a sandwich. Of course, they’ll have gotten theirs at everyone else’s expense and have plenty of private security to keep the pitchforks away. Trillions in “Infrastructure” will see to that. We have to be the biggest collection of sucker’s the world has ever seen! Chi-Com 19 was THE best thing to ever happen to Stateists.
We’re leaving a crushing burden for future generations.
I blame the national debt from Trump 2017 tax cuts to the rich
It's time to cut spending, not taxes.
Just a reminder to everyone that the debt and the deficit are not the same thing.
Given that the GOP has largely controlled US Governmental budgeting since Newt Gingrich's Contract with America, the GOP has a $17,000,000,000,000 debt built up (pre-pandemic) that the party of "fiscal" responsibility need to answer for.
The Biden regime and its left-wing followers will borrow so much money from China before he gets impeached we will all be speaking Chinese because China will own the United States. Please do not put this country further into debt. And stop all foreign and financial aid to this country repairs itself. It’s gonna take new leader ship let’s hear it for Ron DeSantis
I am not going to grouse about some of the COVID spending, BUT events like COVID are one of the very good reasons one should keep the debt under control during non-event periods. Just common sense. If you run up all your credit cards to the limits during good times, what slack to you have when an urgent unfunded need arises. We need to take the trough away from the politicians by enacting reasonable balanced budget law.
You max out your credit card. About 20% of the money was for legitimate purchases. The rest went into lottery tickets, porn site memberships, and shit from QVC. Then you tell the bank if they don't give you a higher limit that you'll go down, and bring them with you. So they raise your limit. And you max it out again immediately on candy, beer, and cigarettes. You tell the bank to raise your limit again, or else. So they do. And you max it out again immediately by buying your drug dealing neighbor a new set of tires for his car. Another call to the bank. More money. More bad decisions. Another call to the bank. More money. More bad decisions. Another call to the bank. More money. More bad decisions. Another call to the bank. More money. More bad decisions. Repeat over and over and over again for 40 years. Now scale it up from your $25,000 worth of credit card debt to $25,000,000,000,000. Yes. That's 25 Thousand Billion dollars. Most people just say 25 trillion, but it doesn't have the same ring to it as 25 million million. If everyone, citizens, legal and illegal aliens, children, babies, literally every human being living in the US had $25,000 of credit card debt, that would total up to roughly $8,750,000,000,000, using 350 million as the number of people. That's about 1/3 of what our national debt is. And they need more money or we're going down. I say we're already down, hopelessly in debt from bad decisions made by bad management and we are collectively unwilling to change. We've been down for quite a while. No more debt. No more. Adult up and cut spending. Don't invent new ways to spend it. Use the money appropriated, and no more. Create a watershed for which programs get turned off first when you have no more money and still need to spend. That's what every single person in the US that isn't in Congress would have to do.
We the people need to hold our senators and representatives responsible for overspending. It makes no sense at all to increase the national debt so politicians can keep trying to buy votes with the taxpayers money. I am extremely angry that these 2000+ page spending bills are being passed without being read. Please start reading these entire bills in session so there can be no excuse for not knowing the harm being done in these bills and to slow down the spending. Maybe members of congress should be forced to pay for these bills and not the taxpayers.
The Congress is utterly reckless and irresponsible about our national debt.