Friday, October 18, 2013

Predictable: Treasury Department Adds Record Debt the Day after Congress Eliminated Debt Ceiling

The October 2013 government shutdown agreement resulted in Congress temporarily(?) removing the debt ceiling. As predicted in a previous post, Treasury has now added a record, $328 BILLION in unrecognized debt to the U.S. public debt in a single day--nearly a third of a TRILLION dollars in debt. This "new" debt was kept off the public debt to avoid exceeding the legal debt limit. The money has already been spent and was "borrowed" from a variety of other public funds including the retirement plans for federal employees. From the chart, even after adding $328 BILLION, Treasury will likely add another $25 BILLION in the next following days, until the actual public debt approaches the blue dashed trend line.

The following chart shows the daily increase or decrease in the U.S. national debt, measured in billions of dollars. It's the same information as above but only presents the day-to-day changes in the debt. The previous record increase followed the 2011 debt-limit debate when Treasury dropped $238 BILLION of off-the-books debt onto the public debt. The latest debt-limit impasse lasted longer and Treasury built up significantly more off-the-books debt. As a result, as soon as Congress removed the limit, Treasury officially recognized $328 BILLION in "new" debt.

Even a drunken sailor can predict that our current debt trajectory is "unsustainable." So what do we do about it?
  • Congress and the President must craft and PASS an actual budget. The U.S. government has continued to operate without a formal budget for most of President Obama's tenure.
  • Congress needs to vote on the fiscal reforms proposed by the Bowles-Simpson debt commission charted by President Obama.

See also ...

Is the U.S. Treasury Hiding Debt (Again)?

The Debt Ceiling and Where Do You Hide $238 BILLION?

1 comment:

  1. Again what you are doing is fallacy of composition. If only you spent time to understand what this national debt is really about. The only way new dollars enter our economy is via deficit spending. Since 1971 the Federal Govt is no longer constrained by a gold standard, so it can deficit spend by keystrokes. Yes, unlimited keystrokes will cause inflation, so that's the only constraint. Hence the reason for enforcing taxes. To regulate and stabilize the value of dollars and to ensure its continued use in the economy. That's the power of fiat. So the Govt spends first and taxes later. What's left is called the deficit for the year. Now big businesses, pension funds, international traders etc all accumulate a lot of these dollars that was spent into the economy and are looking for an risk free investment. So our government helps these "investors" by exchanging interest bearing treasury bonds in exchange for zero interest paying dollar bills. These treasury notes held by both domestic and foreign entities is what constitutes our national debt.