15 July 2013
According to the Daily Treasury Statement for July 12, which the U.S. Treasury released this afternoon, the federal debt that is currently subject to a legal limit of $16,699,421,095,673.60 has stood at exactly $16,699,396,000,000.00 for 56 straight days.
That means that for 56 straight days the federal debt has remained approximately $25 million below the legal limit.
Even though the portion of the federal debt that is subject to a legal limit has not changed in almost two months, the Treasury has continued to sell bills, notes and bonds at a value that exceeds the value of the bills, notes and bonds it has been redeeming.
The “public debt subject to limit”–as the Treasury calls the portion of the federal debt that is legally limited by Congress–first hit $16,699,396,000,000.00 at the close of business on May 17.
Up to that point in fiscal 2013, according to the Daily Treasury Statement, the Treasury had already redeemed approximately $4,776,995,000,000.00 in U.S. debt instruments (bills, notes and bonds) that had matured. At the same time, the Treasury had issued $5,354,508,000,000.00 in new debt instruments. That means that, on net, as of May 17, the part of the federal government’s debt publicly circulated in instruments likes bills, notes and bonds had increased $577,513,000,000 for the fiscal year.
As of the close of business on July 12, the latest day reported by the Treasury, the Treasury had redeemed approximately $5,848,194,000,000.00 in debt and issued approximately another $6,477,293,000,000.00—meaning the publicly circulated debt has increased by a net of $629,099,000,000 so far this year.
Thus, over the past 56 days, the net value of U.S. Treasury Securities circulating in the public has increased by $51.586 billion ($629,099,000,000 minus $577,513,000,000).
How could the value of extant U.S. Treasury Securities increase by $51.586 billion during a 56-day period when the federal government’s debt subject to the legal limit set by Congress has remained constant at $16,699,396,000,000.00—just $25 million below the legal limit?
On May 17, the day the debt began its long stay at $16,699,396,000,000.00, Treasury Secretary Lew sent a letter to House Speaker John Boehner. In the letter, Lew said the Treasury would begin implementing what he called “the standard set of extraordinary measures” that allows the Treasury to continue to borrow and spend money even after it has hit the legal debt limit.
How many days did Lew think he could keep the debt just under the debt limit while the Treasury continued to borrow money?
“The effective duration of the extraordinary measures is subject to considerable uncertainty due to a variety of factors, including the unpredictability of tax receipts, changes in expenditure flows under the sequester, and the normal challenges of forecasting the payments and receipts of the U.S. government months into the future.”
Lew went on to say, however, that “it is now clear that the measures will not be exhausted until after Labor Day.”
If that prediction is correct, it will mean that the Daily Treasury Statement will continue to peg the “debt subject to limit” of the United States at exactly $16,699,396,000,000.00—or just $25 million below the legal limit—for another month and a half.
If the Treasury then says, sometime in September, that it can no longer hold the debt subject to limit at exactly $16,699,396,000,000.00 but must default on the bills of the federal government if the Republican-controlled House of Representatives does not vote to increase the legal debt limit, the Treasury will then be forcing a battle with the Republican House over the debt limit at the same time that the current continuing resolution, which funds the government until Sept. 30, is set to expire.
In his May 18 letter, Lew warned Boehner that the Obama administration would not negotiate with the House to curtail spending in exchange for giving Obama new authority to borrow additional money.
“I want to reemphasize what the president has said repeatedly regarding any threats to cause default in order to extract policy concessions from the Administration,” Lew warned. “We will not negotiate over the debt limit.”
Tomorrow, the U.S. Treasury will again report that the public debt subject to limit is exactly $16,699,396,000,000.00.