The “Extraordinary Measures” that the Government Uses in the Debt-Ceiling Farce to Delay a Default

Estimated Reading Time: 2 minutes

The government can manipulate the gross national debt to keep it below the debt ceiling while issuing new debt. But not for long. Then the game is over.

Periodically, we get to watch our favorite farce, played out in Washington DC in front of a bedazzled world, a product of true creative genius that only American politicians could ever come up with the Debt Ceiling Farce. This one is the Debt Ceiling Farce of 2023. We’re in the middle of it now, the point where the plot starts getting funny. The funny part is how close the government’s checkbook balance will go to zero before the farce is over.

On March 31, there was $194 billion in the government’s checkbook, the Treasury General Account (TGA) at the Federal Reserve Bank of New York, according to the Treasury Department this afternoon. During the two Debt Ceiling Farces of 2021, in October and in December, the balance dropped to $46 billion and $42 billion at the respective low points. During the Debt Ceiling Farce of 2017, the balance dropped to $39 billion. With the huge amounts of money that flow into and out of this account on a daily basis, that was pretty close. Congress then went ahead and lifted the debt ceiling, and the farce was over and everyone went home.

But the cash in the TGA account is only one factor. The other factor is something called the “extraordinary measures” – and we’ll get to them in a moment.

The ending of the farce is already known: Congress will agree on a deal at the last minute, as it has done around 79 times since 1960, and seven times over the past decade.

If they don’t agree on a deal, the US government will default on its obligations, hopefully starting with Congressional salaries, benefits, pension payments, and toilet paper.

But because lawmakers in Washington have stashed lots of theirpersonal wealth in the markets, they’re sensitive to a US government default blowing up said wealth from one day to the next. And with their personal wealth at stake, they’ll get this worked out for sure.

It’s a farce because Congress already appropriated the funds to be spent, telling the Administration in detail via legislation how to spend those funds, and then Congress tells the Administration that it cannot borrow the funds that Congress told it to spend. This whole process is accompanied by all kinds of hilarious rhetoric for the entertainment of us all.

On January 19, the US gross national debt hit the debt ceiling, set by Congress at $31.4 trillion. The Administration now cannot increase the gross national debt. And it has remained flat since then. But note what always happens the day after Congress lifts the debt ceiling: the debt spikes! (We’ll get to the circled event in a moment under “Extraordinary measures at the end of the fiscal year?”):

For example, after the last two debt-ceiling farces ended in October 2021 and in December 2021:

On October 13, 2021, Congress lifted the debt ceiling. The next day, the gross national debt spiked by $300 billion! Over the next seven business days, the debt spiked by $480 billion!….


Continue reading this article at Wolf Street.


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