A hat tip to colleague Errol Tongs for bringing to my attention that the US debt clock exceeded the $14.2 trillion well before the 2nd August deadline – see US debt clock on 16th May below. This did not mean an immediate end to spending or borrowing, as the Treasury took what they term “extraordinary” measures, such as moving money around, until the 2nd August when the government would default on its debt.
On the 16th May Tim Geithner (US Treasury Secretary) officially reported that the federal government has met its statutory borrowing limit of $14,294,000,000,000.
Extraordinary Measures – not unusual
The emergency steps taken by the Treasury include the following:
1. Suspension of new issuance of State and Local Government Series securities, or “SLGS,” which are generally used to finance infrastructure projects.
2. Halting reinvestments in the G-Fund (a federal-employee pension fund) and suspending new investments in the Civil Service Retirement and Disability Fund.
3. Suspension of daily reinvestment of Treasury securities held as investments in the Exchange Stabilization Fund (ESF). This allows the U.S. to intervene in the foreign exchange market to prevent any damage to U.S. exports and the economy.
However these actions are not unusual when you take into condsideration what has happened over the last 15 years. Take a look at the chart below from the Government Accountability Office report to Congress on the Debt Limit.
– SLGS have been suspended 6 times
– G-Fund investments on 5 occasions
– ESF – 4 times