The Debt Ceiling: Extraordinary Measures and Where to Find Them
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On March 7, 2017, the Congressional Budget Office (CBO) announced that if the debt ceiling was not raised or extended before March 16, the Treasury will be unable to borrow funds for standard operating procedures. In order to avoid breaching the debt ceiling, the Treasury will be forced to take extraordinary measures so that it is able to continue borrowing, but this will only last for a short period. Another debt ceiling fight in Congress is inevitable, but most likely not until after the August recess.
Currently, there is no statutory limit on new federal debt; the Bipartisan Budget Act of 2015 suspended the debt ceiling until March 15, 2017 and allowed the Treasury to borrow what was necessary to fund government operations. On March 16, the debt limit will reset to reflect the cumulative borrowing since the Bipartisan Budget Act was passed.
In order to continue borrowing necessary funds, the Treasury takes what it calls “extraordinary measures.” Essentially, these are accounting maneuvers that allow the Treasury to temporarily fund government operations. The extraordinary measures include: suspending investments of the Thrift Savings Plan's G Fund and the Exchange Stabilization Fund; suspending the issuance of new securities, reinvestment of maturing securities, and amortization for the Civil Service Retirement and Disability Fund (CSRDF) and the Postal Service Retiree Health Benefits Fund (PSRHBF); redeeming securities held by the CSRDF and PSRHBF in amounts equivalent to payments due in the future; suspending issuance of new State and Local Government Series securities and savings bonds; and exchanging Federal Financing Bank securities for an equal amount of Treasury securities held by the CSRDF.
These measures will give the Treasury more room to borrow without breaking the current debt ceiling. The affected funds would eventually have their funds returned, with interest, after the debt ceiling was raised.
Some experts estimate that the Treasury will run out of enough money to pay its bills by October or November, while others believe it could be as early as August or September. It should be noted that, with Tax Day approaching (April 18), the government normally runs a surplus that will impact when the debt ceiling is reached, according to the CBO. The CBO estimates that the Treasury will run out of funds in the fall of 2017.