US Gross National Debt to Spike by $800 Billion in October?
US Gross National Debt to Spike by $800 Billion in October? by Wolf Richter – Wolf Street
The other option: too ugly to even imagine.
“There is zero chance, no chance we won’t raise the debt ceiling,” swore Senate Majority Leader Mitch McConnell (R., Ky.) at an event in Louisville, Kentucky, on Monday.
He who couldn’t get his Republican ducks all lined up in a row to get any major legislation passed this year was confident that the Senate would pass a bill that would raise the debt ceiling so that the government could continue to pay for things that Congress told the Government to pay for, and so that the government could service its debts, rather than default on them.
Treasury Secretary Steven Mnuchin was there with him, pleading once again for a “clean” debt-ceiling increase, according to the Wall Street Journal. His “magic super Treasury powers” that allow the government to conserve cash to avoid having to issue more debt will expire at the end of September, he said.
“This is not about spending money,” he said. “This is about paying for what we’ve spent, and we cannot put the credit of the United States on the line.”
The debt ceiling is just under $20 trillion. While the government can issue bonds to redeem maturing bonds – and it does this all the time – it cannot allow the gross national debt to go beyond the debt ceiling.
But because it has to continue to pay for things that Congress mandated in its various spending bills over the years, the Treasury scrounges up the money from other government accounts, robbing Peter to pay Paul, so to speak. For example it temporarily short-changes the Civil Service Retirement and Disability Fund. These “extraordinary measures,” as they’re called, or the “magic super Treasury powers,” as Mnuchin called it, run out after a while.
Mnuchin said in his last letter to Congress that the out-of-money-date is September 29. But as in the past, the real out-of-money date can probably be stretched into October.
These shenanigans make the entire world shake its collective head and pray that Congress, after going through its charade, will for the umpteenth time raise the debt limit. The other option is a US default. Its global consequences are too ugly to even imagine.
But this charade has some peculiar effects, beyond its entertainment value: for months on end, it covers up the true extent of US government debt, and the current surge of this debt.