We have hit the debt ceiling – again. This time, the manufactured crisis is being put on slow-track, while Congress refuses to address one of the principal responsibilities they have.As of March 16, we are at risk of defaulting or having our credit rating reduced if Congress does not act. The US Treasury will have to take “extraordinary measures” to keep the federal government’s head above fiscal water.
In a March 14 UPI article; “Unless Congress acts quickly to raise the limit, those measures will include putting a stop to a planned $46 billion investment in the federal employee pension fund, which is scheduled for June. By halting the reinvestments, the government effectively borrows that money to help stay under the debt. However, by law, that money must be repaid before the debt limit can be increased again.
Other measures the Treasury will likely take are drawing down a currency stabilization fund and imposing moratoriums on state and local government deposits.”
In a recent letter to John Boehner, Treasury Secretary Jacob Lew wrote, “In anticipation of reaching that date, Treasury has suspended until further notice the issuance of State and Local Government Series securities, which count against the debt limit.
Because Congress has not yet acted to raise the debt limit, the Treasury Department will have to employ further extraordinary measures to continue to finance the government on a temporary basis. Therefore, beginning on March 16, I plan to declare a “debt issuance suspension period” with respect to investments of the Civil Service Retirement and Disability Fund and also suspend the daily reinvestment of Treasury securities held by the Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan. These actions have been employed during previous debt limit impasses and are described in the appendix to this letter.
Protecting the full faith and credit of the United States is the responsibility of Congress, because only Congress can extend the nation’s borrowing authority. No Congress in our history has failed to meet that responsibility. The creditworthiness of the United States is not a bargaining chip, and I again urge Congress to address this matter without controversy or brinksmanship.
Accordingly, I respectfully urge Congress to raise the debt limit as soon as possible.”
Fortune takes a look at the issue in a related story; “Now that Republicans control the Senate, the GOP’s hand might be stronger this time around. For instance, Congress could send a debt-prioritization bill to the President, which would ensure that U.S. debt-holders would get their interest payments no matter what. This would allow the GOP to avoid blame for a default and reduce the risk of a government shutdown.
The Treasury Department, on the other hand, argues that debt prioritization isn’t possible given the way its computer systems are designed to pay the government’s bills. As Krueger writes, “Prioritization is a very grey area.” Even if the government is able to ensure that the U.S. doesn’t technically default, the situation would “get very ugly very fast,” he says. After all, prioritization would require the government to not pay a large portion of its bills, from social security checks, medicare payments, troop salaries, or any of the many other services the Feds provide. This would deal a major blow to individual Americans and the U.S. economy.
The threat of a shutdown is one of the biggest risks facing the global economy in 2015. Let’s hope the President and Congress can learn to play nice.”
In an all-too familiar song and dance pony show, both parties will make this a political football and wage verbal wars instead of the serious conversations needed about how to move forward without doing further damage to an already fragile economy and vulnerable people living on the edge of self-reliance.
We don’t expect anyone with responsibility for resolving this to play nice. We don’t even expect them to remember the two core words of “compromise” – “COME PROMISE.”