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Can the US Government Gobble Up $339 Billion in One Day?

November 5, 2015

At the same time Americans guzzled on Halloween candy, the federal government gorged on debt.

The day before Halloween the national debt was $18.153 trillion and by the end of Monday, after the President signed the law to suspend the debt ceiling, the debt had shot up by $339 billion to $18.492.

Can the government really spend and borrow that much money in one day?

It all depends on how you count.

The truth is the government reached the debt ceiling limit last March, the Treasury department has just been using creative accounting to pretend the government didn't already go above the arbitrary limit.

In a letter to former Speaker of the House John Boehner, Treasury Secretary Jacob Lew stated, "On March 16, 2015, the outstanding debt of the United States reached the statutory limit. As a result, Treasury began employing extraordinary measures to continue to finance the government on a temporary basis."

These "extraordinary measures" or "creative accounting" occur when the Treasury "borrows" the extra cash balances from trust funds to fund the rest of the government, but does not issue the related loan documents. The real world equivalent would be your bank borrowing money out of your 401(k) account, but not giving you a loan document that says they need to repay you.

The government trust funds involved usually includes those like the Thrift Savings Plan for federal employees and the Civil Service Retirement and Disability Fund. So far the Social Security trust fund has not been involved in these extraordinary measures.

Now that the debt limit has been suspended, the Treasury department quickly issued the appropriate loan documents indicating the amount that has been "borrowed" from the trust funds since March.

The use of these extraordinary measures allows the government to continue to spend without Congressional authority. Isn't one of the major purposes of the debt ceiling limit to limit spending to the amount authorized by Congress?

The reason that this talk of extraordinary measures may be confusing because it is an example of the smoke and mirrors used to hide the true debt and spending of the government.

Citizens and their elected officials cannot be knowledgeable participants in the financial decisions of the government if the government isn't truthful and transparent about its true financial, including the true amount of debt.

Once again this is why Truth in Accounting is so important.

 
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