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[TSP_Strategy] Debt Ceiling Looms

 

Treasury Moves Debt Ceiling Deadline Closer

1:26 PM ET

The time for Congress to raise the debt ceiling tightened on Thursday, with the Treasury Department moving the deadline up two days to Nov. 3.

In a letter to lawmakers, Treasury Secretary Jack Lew said the government's "projected net resources" have come in below expectations, causing the sooner-than-anticipated date that the government will no longer be able to meet its obligations. Congress suspended the debt ceiling -- which places a statutory cap on how much money the federal government can borrow -- in February 2014. That suspension expired in March, but Treasury has used "extraordinary measures" to give itself more wiggle room to pay its bills.

Those measures include a suspension of daily reinvestments into the Thrift Savings Plan's government securities (G) Fund, as well as investments into the Civil Service Retirement and Disability Fund. Both of those funds will be made whole with interest upon the resolution of the current debt ceiling issue.

Congress must agree to lift or again suspend the $18.1 trillion debt limit by Nov. 3, or the government will default on some of the obligations it has already incurred. Republican lawmakers have used the deadline as a negotiating tactic, saying they would not agree to raise the ceiling unless federal spending was cut. In 2011, that posture created a standoff that ultimately led to the Budget Control Act and the resulting sequester caps.

Obama has said he will not negotiate over the debt ceiling this time around. A failure of the government to pay its debts would compromise the full faith and credit of the United States, Obama said, and would threaten a global recession. Outgoing House Speaker John Boehner, R-Ohio, is reportedly planning to move on a clean debt limit increase before he retires from his post and Congress on Oct. 30. 

The U.S. government has never defaulted on its obligations, so it remains unclear exactly what the fallout would be if Congress fails to act. A default could result in furloughs or delayed paychecks for federal employees. Before a potential debt ceiling crisis, Congress faces a deadline to refill the Highway Trust Fund. Lawmakers also must determine a way to fund federal agencies beyond Dec. 11. The looming deadlines could encourage lawmakers to again turn to feds' benefits to offset the associated costs. 

(Image via jesadaphorn / Shutterstock.com)


1:26 PM ET

Treasury Moves Debt Ceiling Deadline Closer

 

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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.

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