Debt Limit Hit on New Year’s Eve!

Today is the day.

The federal government debt limit ceiling will be reached by end-of-business today.

A huge $100-$200 billion Treasury bond payout happens on the last business day of every calendar year. It will put us over the top.

The payout was $167 billion on December 31st of 2009, $154 billion in 2010 and $98 billion in 2011. In an improving economy, it’ll probably be around $90 billion today.

The U.S. was $56 billion under the limit at last reporting by the U.S. Treasury Department on December 27th.

The bad news is that right off the bat we will have already spent about $35 billion of the $200 billion or so in “extraordinary measure” reserves the Treasury has to stave off default before the clock even starts ticking. That will leave only about $165 billion left of the reserve to work with.

Treasury Secretary Geithner has warned that this time around, because of its timing, there are fewer places to chose from for the Treasury to draw emergency funds.

That means the number of days before default will far fewer than the 78 days there were in 2011 in the last contentious debate.

Brought on by the failed fiscal cliff negotiations, though it seems hardly possible, the fight over raising the debt ceiling will be even more contentious than before.

The debt hawks will out in force… and they should be.

That fight will happen regardless of what the Congress does, if anything, today.

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Dec 31, 2012, in Business, culture, Debt crisis, economics, fiscal cliff, Government, Life, news, Opinion, Politics. Bookmark the permalink. 2 Comments.

  1. We live in cartoon land. Last night we went over the cliff, but in cartoon land as long as you keep gunning and do not look down you will not crash. Watch Road Runner and Wiley Coyote cartoons to see what I mean. We went over the cliff, are still running, but no one has looked down yet. When that happens poor Wiley plummets down the canyon and disappears in a poof. In cartoon land he does not die and comes back another day. But what happens when we meet our poof moment in two months?

    Have a Happy New Year. You will undoubtedly get to revisit the cliff again and again given the crowd governing in DC.

    • In his book, “End This Depression Now”, Paul Krugman talks about the Wile E. Coyote Moment. I think he also calls it a ‘liquidity trap’ where people actually try to get their finances under control which crashes a currency.

      Krugman rejects the entire concept of debt reduction, of course.

      The effect of the Senate fiscal cliff deal delaying sequestration two months is a political ploy to avoid sequestration all together. The delay simply folds it into the next debt ceiling debate as if 2011 never happened. Clever move on the part of the President.

      Congress and the President appear to have no intention of becoming fiscally responsible.

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