Surprise, surprise. The government is about to run out of money to pay for our nation’s bills. Again.
Treasury secretary Jack Lew warned Congress that the government will run out of money at the end of the month unless the debt ceiling is raised. If you recall, the debt limit was suspended in the October 2013 deal to reopen the government, but is expected to be resurrected to its full $17.3 trillion standing on Friday.
That leaves Lew bumping up against the limit in tax-filing season, telling Congress that he will have far less flexibility to juggle the books and ward off disaster.
“Unlike other recent periods when we have had to use extraordinary measures to continue financing the government, this time these measures will give us only a brief span of time,” Lew said in a speech at the Bipartisan Policy Center. “Given these realities, it is imperative that Congress move right away to increase our borrowing authority.”
Congress, not surprisingly, is slow to act. Even though House Speaker John Boehner (R-Ohio) said that he will not let the nation default on its debt, House Republicans didn’t devise a plan for bartering with Democrats in exchange for raising the debt limit.
And if the two parties don’t come to a decision, the Treasury will start to take “extraordinary measures” to conserve cash.
There are two powerful “extraordinary measures.” The first, which is available, is through the federal employees’ retirement investments, known as the G Fund because it holds government bonds. The government can temporarily reduce how much debt is held by the fund, which gives it more room to borrow within the debt limit.
The second measure, which is not available, is making new investments to the civil-service disability and retirement fund, which the government uses to pay out civil service pensions. The fund sometimes has maturing securities, or interest that has been earned on those securities, that are added to the account. In the past, Treasury has been able to defer those new investments, which gives the government more borrowing authority. But during the next month, no securities are scheduled to roll over, and no interest will be credited to the fund.
And so the nation waits to go broke…or for the most unproductive Congress in modern history to budge. Guess we’ll see what happens at the end of the month.
SOURCE: Washington Post | VIDEO SOURCE: Bloomberg
