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

Senator Obama Calls President Obama "A Leadership Failure"

Remember back in 2006 when President Obama spoke like a member of the Tea Party (the Tea Party hadn't been created yet)?

As the United States Congress and the President once again discuss raising the debt ceiling, it's good to ponder the words from then-Senator Barack Obama to the Senate on 16 March 2006. Back then, our official public debt was just $8.6 TRILLION.  It currently stands near $17 TRILLION, much of that increase under President Obama's reign.

Mr. President, I rise today to talk about America's debt problem.

The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies.

Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion. That is "trillion" with a "T." That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President's budget will increase the debt by almost another $3.5 trillion.

Numbers that large are sometimes hard to understand. Some people may wonder why they matter. Here is why: This year, the Federal Government will spend $220 billion on interest. That is more money to pay interest on our national debt than we'll spend on Medicaid and the State Children's Health Insurance Program. That is more money to pay interest on our debt this year than we will spend on education, homeland security, transportation, and veterans benefits combined. It is more money in one year than we are likely to spend to rebuild the devastated gulf coast in a way that honors the best of America.

And the cost of our debt is one of the fastest growing expenses in the Federal budget. This rising debt is a hidden domestic enemy, robbing our cities and States of critical investments in infrastructure like bridges, ports, and levees; robbing our families and our children of critical investments in education and health care reform; robbing our seniors of the retirement and health security they have counted on. Every dollar we pay in interest is a dollar that is not going to investment in America's priorities. Instead, interest payments are a significant tax on all Americans — a debt tax that Washington doesn't want to talk about. If Washington were serious about honest tax relief in this country, we would see an effort to reduce our national debt by returning to responsible fiscal policies.

But we are not doing that. Despite repeated efforts by Senators Conrad and Feingold, the Senate continues to reject a return to the commonsense Pay-go rules that used to apply. Previously, Pay-go rules applied both to increases in mandatory spending and to tax cuts. The Senate had to abide by the commonsense budgeting principle of balancing expenses and revenues. Unfortunately, the principle was abandoned, and now the demands of budget discipline apply only to spending. As a result, tax breaks have not been paid for by reductions in Federal spending, and thus the only way to pay for them has been to increase our deficit to historically high levels and borrow more and more money. Now we have to pay for those tax breaks plus the cost of borrowing for them. Instead of reducing the deficit, as some people claimed, the fiscal policies of this administration and its allies in Congress will add more than $600 million in debt for each of the next 5 years. That is why I will once again cosponsor the Pay-go amendment and continue to hope that my colleagues will return to a smart rule that has worked in the past and can work again.

Our debt also matters internationally. My friend, the ranking member of the Senate Budget Committee, likes to remind us that it took 42 Presidents 224 years to run up only $1 trillion of foreign-held debt. This administration did more than that in just 5 years. Now, there is nothing wrong with borrowing from foreign countries. But we must remember that the more we depend on foreign nations to lend us money, the more our economic security is tied to the whims of foreign leaders whose interests might not be aligned with ours.

Increasing America's debt weakens us domestically and internationally. Leadership means that "the buck stops here." Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

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

What the President Said and What He Should Have Said

During his 2013 Inauguration speech, President Obama sounded a clear warning on the possible dangers of climate change.

"We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity.  We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.  Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms."

It's funny how the President can be so focused on the possible dangers of climate change, yet apparently so incredibly blind to obvious threats posed by massive overspending and deficits created by the federal government--a significant chuck added under his own supposed "leadership."  A bankrupt federal government will have ZERO hope of influencing environmental policy.

Here's what President Obama should have said.

We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity.  We will respond to the threat of massive federal government indebtedness and overspending, knowing that the failure to acts betrays our children and future generations of Americans.  Some may still deny the overwhelming judgment of basic economics, but none can avoid the devastating impact of annual trillion dollar deficits, an unsustainably-expensive social safety net, and large increases in inflation if we continue to borrow heavily from the Federal Reserve Bank.  Massive indebtedness, unless for an investment that will provide gain, is merely just postponed poverty. 

As a side note, here's a snippet from the Social Security and Medicare Trustees' Report, signed by three Obama Administration cabinet officials.

Projected long-range costs for both Medicare and Social Security are not sustainable under currently scheduled financing and will require legislative action to avoid disruptive consequences for beneficiaries and taxpayers. If lawmakers act sooner rather than later, they can consider more options and more time will be available to phase in the changes, giving the public adequate time to prepare. Earlier action would also help avoid adverse impacts on vulnerable populations, including lower-income workers and people dependent on program benefits.

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

IDEA: Government Efficiency Standards Modeled on Fuel Standards

"... what [is] good for the country [is] good for General Motors, and vice versa." -- Charles E. Wilson, former President of General Motors and Secretary of Defense in the Eisenhower Administration.

The White House recently mandated new fuel-efficiency standards for cars and trucks sold in the United States. Presently, the U.S. fuel standard is 28.3 miles per gallon. The new standard mandates 54.5 miles per gallon by 2025, just fifteen short years from now.

This new government standard mandates a 93% improvement, saving money and reducing greenhouse gas emissions. Cars and trucks sold in 2025 must be nearly TWICE as efficient as they are now. New cars could travel the same distance burning only half as much fuel. Imagine the power of the government's mandate!

Okay, now imagine if U.S. citizens placed similar mandates on the federal government. By 2025, we could have a similar-sized federal government that burns only half as much money.

Currently, the U.S. federal government borrows about $0.42 of ever $1.00 that it spends. If we could improve government efficiency at delivering necessary services, we could reduce our enormous budget deficits and reduce the national debt.

Debt Speech BINGO!

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.

Useful Information for Under-taxed Individuals

Despite ample evidence (here, here, and here) that wealthier taxpayers already pay the bulk of U.S. taxes, a number of supposedly wealthy commentators and bloggers believe that they are under-taxed and should be forced to pay more taxes. I say, why wait for Congress to take action? If you truly believe that the government is the best and most-prudent investment of your hard-earned income, you can make additional voluntary contributions now.

1. Decide not to declare any deductions and not take any exemptions or credits on your federal income tax return. This will immediately boost your adjusted gross income (AGI) and increase the amount of taxes owed. For example, if you have a large mortgage on your home, do not take the deduction allowed on mortgage interest. Do not write off other taxes that you might have already paid. WARNING: Your accountant may question your sanity.

2. Give directly to the United States Government. Here's how, courtesy of the United States Treasury web site. Okay, in full disclosure, you are not actually paying additional income tax but you are helping to reduce the tremendous $13 TRILLION+ national debt, which reduces current and future interest payments paid by the government. Reducing interest payments frees those funds so that the government can spend on other programs.

How do you make a contribution to reduce the debt?

There are two ways for you to make a contribution to reduce the debt:

1. You can make a contribution online either by credit card, checking or savings account at Pay.gov
   
2. You can write a check payable to the Bureau of the Public Debt, and in the memo section, notate that it's a Gift to reduce the Debt Held by the Public. Mail your check to:

Attn Dept GBureau of the Public DebtP. O. Box 2188Parkersburg, WV 26106-2188

Alternatively, you can provide your money as a gift to the United States Government.

Gifts to the United States Government

How do I make a contribution to the U.S. government?

Citizens who wish to make a general donation to the U.S. government may send contributions to a specific account called "Gifts to the United States." This account was established in 1843 to accept gifts, such as bequests, from individuals wishing to express their patriotism to the United States. Money deposited into this account is for general use by the federal government and can be available for budget needs. These contributions are considered an unconditional gift to the government. Financial gifts can be made by check or money order payable to the United States Treasury and mailed to the address below.

Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782

Any tax-related questions regarding these contributions should be directed to the Internal Revenue Service at (800) 829-1040.

If you do decide to donate or provide a gift to the United States Government, please let me know via the comment section or send me an E-mail. Any donation larger than $250 will receive a personal "Thank You!" from me, another average citizen. Also, please let me know if you would like your name added to the Honor Roll below.

HONOR ROLL

[updated 3-AUGUST-2011]

The following individuals have contributed $250 or more to reduce the national debt and to help reduce the cost burden of the United States Government for all Americans. On behalf of all Americans, you have our thanks and gratitude!

[NONE REPORTED TO DATE]

See Also ...

• "Who Pays Their "Fair Share' in California?"
  
• http://soquelbythecreek.blogspot.com/2011/10/who-pays-their-fair-share-in-california.html
  
• "Is Warren Buffett Paying His 'Fair Share'?"
  
• http://soquelbythecreek.blogspot.com/2011/08/is-warren-buffet-paying-his-fair-share.html
  
• "Pretty Pictures and a Political Rorschach Test: A History of the U.S. Income Tax System"
• http://soquelbythecreek.blogspot.com/2011/03/tax-infographic-is-political-rorschach.html
  
• "The Rich Don't Pay Taxes" Lie: Purposely Deceptive or Backed Up by Data?
  http://soquelbythecreek.blogspot.com/2010/02/rich-dont-pay-taxes-lie-purposely.html
  
• The Oppressive Progressive Income Tax: California Edition
  http://soquelbythecreek.blogspot.com/2009/07/oppressive-progressive-income-tax.html