Saturday, September 12, 2009

Debt-Ceiling Tricks

The Treasury is preparing to use some tricks to get around the debt ceiling if there is a congressional delay in approval.

WSJ reports:

With the U.S. borrowing about $30 billion a week, some economists say the Treasury will need an increase of as much as $1.5 trillion if it wants to avoid another request before the 2010 midterm elections....

The Obama administration, concerned about the possibility of a big political fight over the national debt, is looking at how it can continue funding the government in the event that Congress hinders its ability to borrow money.

Treasury Department officials are examining tools employed by previous administrations, including disinvesting government retirement funds and suspending interest payments to federal accounts, according to people familiar with the matter. They are also looking at what to do in the unlikely event of a government shutdown...

On six occasions since 1995 the government has taken unusual and controversial steps to continue meeting obligations, including shifting government employee-retirement funds out of Treasury securities and into idle cash, and withholding year-end interest payments to government trust funds...
BTW "shifting funds out of Treasury securities" is the polite smoke screen way to say, "selling Treasury securities".

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