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)?

http://soquelbythecreek.blogspot.com/2013/07/is-us-treasury-hiding-debt-again.html

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

http://soquelbythecreek.blogspot.com/2011/08/debt-ceiling-and-where-do-you-hide-238.html

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

"You can observe a lot by just watching." 

-- Yogi Berra

A number of web sites have been amazed that the U.S. public debt holds remarkably steady near the maximum legal limit of $16,699,396,000,000.00 ($16.699 TRILLION) for 70 days and counting.  Has the U.S. government stopped spending?  Okay, pick yourself off the floor from laughing.  No, the Treasury is simply hiding debt using "extraordinary measures", as they've done in the past.

The Treasury provides the daily debt status on their web site.  You can also search for historical data. Here's a chart the graphs this total pubic debt since January 1, 2008.  Click to enlarge.  The chart also shows the legal debt limit in effect over time.  Note that there have been prior periods where the debt remained remarkably flat for a long period of time--before August 2, 2011 as an example.

As soon as Congress approves a new, higher debt limit, the Treasury remarkably reports a surge in new debt.  It's an old game.  After Congress increased the debt ceiling on August 1, 2011, miraculously, the U.S. needed to borrow nearly a quarter trillion dollars in new debt!  Where did Treasury hide that $238 billion in debt?  Similarly, the Treasury borrowed $120 billion in new debt over a two day period starting January 30, 2012.  Enron and WorldCom accountants would be proud.

Applying a linear regression of the data (R-squared is 0.9874, indicating a good match), it appears that the U.S. government is borrowing roughly $3 billion a day!  Granted, the Federal Reserve is currently buying $85 billion in U.S. debt per month, so the two numbers jive nicely ($85 billion divided by 30.4 days per month equals about $2.8 billion per day).  As reported by the Treasury, the total public debt remained flat at about $16.699 TRILLION. However, at $3 billion per day, the projected debt very likely currently exceeds $17.10 TRILLION.  So where is Treasury hiding that extra third to half a trillion dollars?

Once Congress inevitably increases the debt limit, as they always do, stay tuned for a whopper of a borrowing day by the Treasury.  Of course, we could balance the federal budget, but ...

See also ...

United States Treasury Department: The Daily History of the Debt Results (1-JAN-2011 to 26-JUL-2013, “Total Public Debt Outstanding”)

www.treasurydirect.gov/NP/debt/search?startMonth=01&startDay=01&startYear=2011&endMonth=07&endDay=26&endYear=2013

The Concord Coalition: Understanding the Federal Debt Liming (Increases in the Debt Limit since 1997)

www.concordcoalition.org/issue-briefs/2013/0114/understanding-federal-debt-limit

Congressional Research Service: The Debt Limit: History and Recent Increases (May 22, 2013)
www.fas.org/sgp/crs/misc/RL31967.pdf

Soquel by the Creek: The Debt Ceiling and Where Do You Hide $238 BILLION?
soquelbythecreek.blogspot.com/2011/08/debt-ceiling-and-where-do-you-hide-238.html

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

If you followed the USA's debt-ceiling debate, you may remember that U.S. Treasury Secretary Timothy Geithner said that the U.S. Government would reach the Congress-imposed debt ceiling on 16-MAY-2011.

As Congress did little to act on the debt ceiling up to that point, the debt-ceiling debate was delayed until a 1-AUG-2011 drop-dead date. The Treasury admitted to delaying payments to certain federal retirement and disability funds to postpone the date beyond 16-MAY-2011. Using the ever-popular "everybody-does-it" defense, Secretary Geithner claims, "Each of these actions has been taken in the past by my predecessors during previous debt limit impasses."

After tortuous debate and political wrangling, the U.S. Congress agreed to increase the debt ceiling. Immediately afterward, the U.S. Treasury borrowed a record $238.3 BILLION in a single day!

(click to enlarge)

The chart above uses data directly from the U.S. Treasury and shows the accumulated total public debt from 1-JAN-2011 until 3-AUG-2011. The red line shows the TOTAL public debt. Not all of the debt is subject to the debt ceiling (as described here and here), so the line seemingly crosses the official debt ceiling limit. However, the red line flattens out on 16-MAY-2011, the day that Treasury Secretary Timothy Geithner says that the U.S. hit the official debt limit.

At first glance, it would appear that the U.S. debt did not increase from 16-MAY-2011 until 2-AUG-2011 and then suddenly the debt increases by $238.3 BILLION. However, from the historical "burn-rate", the U.S. Government was in reality still borrowing an average of $2.72 BILLION per day! The blue dashed line shows extrapolated borrowing even during the period where the official total debt flat-lines.

In essence, the Government merely stopped borrowing on the open market and instead borrowed from federal employees and retirees--many whom where likely unknowing and unwilling U.S. creditors.

So, where did the U.S. Treasury "hide" this $238.3 BILLION? If a public company acted this way, these actions would likely trigger an SEC investigation (and shareholder lawsuits). But, as we sadly know, the U.S. government isn't constrained by the same rules that it mandates for everybody else.

In a side note, the total USA public debt is rapidly reaching the size of the U.S. gross domestic product (GDP). In 2010, the U.S. GDP was $14.658 TRILLION.

QUESTIONS:

• Where did the U.S. Treasury "hide" this $238.3 BILLION?
• Were their actions legal?
• Were their action ethical?
• The Congress delayed action on handling the debt crisis well beyond the original 16-MAY-2011 date. How much did Congress' inaction cost the nation?

See also ...

• "Growth in USA Public Debt (2001 to 2021)"
  http://soquelbythecreek.blogspot.com/2011/07/usa-public-debt-january-2001-to-june.html
  
• "IDEA: Government Efficiency Standards Modeled on Fuel Standards"
  http://soquelbythecreek.blogspot.com/2011/07/idea-government-efficiency-standards.html

Growth in USA Public Debt (2001 to 2021)

The following chart shows the U.S. public debt from 2001 to 2021. The data from January, 20001 through June, 2011 uses the latest public debt data available directly from the U.S. Treasury. The values from 2012 through 2012 use public debt data (Table 1-4) from the Congressional Budget Office's (CBO) January 2011 baseline projections. Adjacent to segments of the data is the growth rate in the debt. You can see that the debt from 2009 through 2011 greatly exceeds the historical growth rate. For example, the growth rate in the debt from 2002-2008 was about $505 BILLION per year. The growth rate from 2009-2011 jumped to about $1.2 TRILLION per year, or over two TIMES the previous growth rate.

The chart also lists the political leaders of the United States during this period, including the President, the Senate Majority Leader, and the Speaker of the House. Lastly, the chart shows the political party that controlled the Congress at large.

(click to enlarge)

President George W. Bush was inaugurated in January, 2001 and his Presidency lasted until Barack Obama was inaugurated President in January, 2009. The Bush Administration saw a tremendous amount of political and financial turmoil.

• The crash of the telecom/Dot-Com bubble in 2000 until 2001. The resulting recession of March through November 2001, the Republican-dominated Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)--the first part of the Bush Tax Cuts.
• The terrorist attacks on September 11, 2001 targeting the World Trade Center in New York, the Pentagon in Washington, D.C., and an additional attack thwarted by passengers that crashed in Pennsylvania.
• The Afghanistan War beginning in October, 2001, a response to the World Trade Center attack. Congress granted authority to use force on September 14, 2001, signed by President Bush a week after the 9/11 attacks.
• The second Iraq War beginning in March, 2003. Congress had previously granted authority to use force in October 2002.
• In September, 2003, the Bush Administration asked for significant oversight reform of mortgage giants Fannie Mae and Freddie Mac. Congress did not act.
• In 2005, Senator Chuck Hagel introduced reform legislation over government-sponsored home mortgage enterprises. The legislation died in committee.
• Hurricane Katrina struck New Orleans and the Gulf States in August 2005. The damage wrought by Katrina made it the costliest in U.S. history and the deadliest in recent history.
• Medicare Part D, passed in 2003, went into effect in 2006.
• The subprime mortgage/housing bubble in 2006 through 2008.
• The collapse of Lehman Brothers in September, 2008.
• The government seizure of semi-governmental Fannie Mae and Freddie Mac, also September, 2008.
• The passage of the Trouble Asset Relief Program (TARP), a bank rescue program, in October 2008.
• Due to the economic turmoil in the banking and real-estate sectors, a number of major banking institutions failed and were consolidated into healthier banks.
• Mass layoffs and a rising unemployment rate.

Republic President George W. Bush enjoyed a Republican-majority Congress during 4.5 of his eight years in office. Due to the deteriorating economy and the wars in Iraq and Afghanistan, the Republicans lost control of both Houses of Congress in the 2006 election cycle. Democrats controlled both Houses from 2007 until 2011, when Republicans regained the House. Despite having a divided Congress in the latter party of his second term, President Bush rarely exercised his veto power over Congress or its spending.

In an historic election, Barack Obama became the country's first African-American President. Although President Obama inherited economic turmoil, the Obama Administration and Congress embarked on its own spending programs. President Obama also inherited a significantly larger debt to pay for the TARP bank bailouts, some of which has since been repaid. President Obama enjoyed a solid nearly veto-proof majorities in both Houses of Congress from 2009 until the Republicans reclaimed the House in 2011.

• Soon after Barack Obama's inauguration, the Congress passed a $787 billion economic stimulus package called the American Recovery and Reinvestment Act (ARRA).
• The federal government rescued failing automobile manufacturers General Motors (GM) and Chrysler. The federal government became a majority shareholder in GM and sold a majority of Chrysler to Italy's Fiat.
• The Congress passed a $3B "Cash for Clunkers" program to spur auto sales.
• A further escalation of the Afghan conflict in December, 2009, including air attacks from drones in Pakistan.
• The Congress re-authorized the expiring Bush Tax Cuts in December, 2010 for another two years. The "Great Recession" of December, 2007 through June, 2009 still held sway over the United States economy.
• A new military conflict began in Libya in March 2011, in an attempt to sway the ongoing civil war.
• Due to high levels of unemployment, the Congress extended the time allowed for long-term unemployment benefits.
• Due to changes in the tax code and the weak economy, about 46% of taxpayers will pay no federal income taxes or will receive a net refund in 2011.