The debt ceiling conversation begins and ends with poor accounting standards.
Let's look at the terminology used.
Treasury Secretary Janet Yellen has declared we are in a "debt issuance suspension period." This is a fancy way to say, "We have already reached our credit limit but are using accounting gimmicks to pretend we haven’t.”
The government’s budgeting process uses cash-basis accounting while ignoring the Treasury Department's annual comprehensive financial report. In a nutshell, this flawed system means they don't consider how they will pay for their proposed spending and didn't even have the correct numbers when they enacted the budget.
According to Secretary Yellen, the Treasury Department uses "extraordinary measures" to allow the government to continue its operations for a limited period. "Extraordinary measures" is code for "we don’t have the money, so we will just stop paying into the retirement funds of federal employees, like the Postal Benefits Fund or the Civil Service Retirement and Disability Fund, just to name a few.” Creative accounting maneuvers are being used to skip these and other payments that must be paid back with interest, adding more to our national debt. It's an accounting shell game.
The purpose of the debt limit is to ensure the Treasury Department only borrows what Congress has authorized. But this accounting shell game allows the Treasury to circumvent the limit during the debt issuance suspension period.
What is the purpose of having a debt limit if Congress increases it constantly? Since our elected officials have shown no fiscal restraint on either side of the aisle, the debt ceiling has been raised more than 90 times in the 20th century alone.
When you and I reach the limit on our credit cards, we aren't allowed to charge anymore. When Congress reaches its credit limit, it just raises the amount.
The truth is poor budgeting practices, and accounting standards allow them to continue with their fiscal mismanagement. We must demand the standards be changed!
Watch our latest video explaining accounting's reign of power and its ability to build and destroy nations.