No More Buried Treasure?
By: Sarah Broge
The Treasury
Department has been working overtime ever since May of 2013, when the country
hit its debt limit. Extraordinary measures, as the department called them, have
been in effect to keep paying the countries bills. It was estimated that these
measures would come to an end sometime in October of this year. Even though the
prediction is correct, there may be some hidden consequences.
The Department of
Treasury has four basic functions: collecting taxes, paying bills, enforcing
finance and tax laws, and managing currency, government accounts and public
debt. When the United States hit its debt limit, the department took over,
managing the accounts and making sure all bills that could be paid, were paid.
Now it’s October and
the estimated ending date is within reach, but the stability of the department
itself is in question. There may not be enough money in the department to pay
the bills and once the money runs out, it runs out. The administrators within
the Treasury Department have been keeping quiet about their plans when the
money runs out. The Obama administration stated that there is no way to work
around the on-debate debt ceiling.
There is about $55
billion due in federal payments. If congress fails to raise the debt ceiling,
market turbulence, lowered confidence and a slower economy is expected to be a
result. Investors and politicians question what would happen to the economy,
the markets and even the government, if the treasury department could only
spend as much as it took in.
Isn’t that the whole
point of money though? Only to spend as much as you have? There was a familiar
scenario in the 1920’s when people spent more money than they had which
contributed to the stock market crash and ultimately the depression. Has the
government and even the people, learned from the nation’s history about money?
It’s basic science if it’s looked into deeply enough. People can only spend as
much as they have or else they will have a debt to pay and the ability to pay
that debt rises and falls as their surroundings do.
If the Treasury
Department breaches the debt ceiling, they would have to balance the
government’s budget. Until Congress has the chance to raise the debt ceiling
again, the Department will have to refrain from spending 30% of government
payments, which economists say could be enough to tip the economy into another
recession within days or weeks.
An option that the
Department has is to delay the federal payments instead of cutting across the
board. The payments would be prioritized, the extent not yet being shared, and
paid off before the Treasury runs out of money and the bills are due. According
to a Suisse analysts note to clients, “a system either makes all of its
payments, or it doesn’t make any at all.” A quote such as this could be applied
to the situation or not, it all depends on who is analyzing it. Someone on the
inside may have a direct conclusion to any confusion about the Treasury
Department’s ordeal but lips are sealed as the clock ticks on.
This is really interesting. I agree with what you mentioned about spending limits: "Only spend as much as you have." I think it's astonishing that the government has let the debt get so high and, to be honest, I'm not seeing any huge changes being made to try improving our situation. That worries me. Like you said, it could lead to another depression. With the amount of debt the U.S. owes, it seems almost impossible to turn things around, but I'm really hoping we find a way soon or else our country is in big trouble.
ReplyDeleteIt's a shame that the U.S. can't come to an agreement about the debt ceiling, and set aside their difference so the U.S. population wouldn't suffer. The U.S. would probably raise the debt ceiling again, like before because of the ease and the benefits it provides that finding a stable budget. Still it would be great if the U.S would start to pay back the debts so the economy wouldn't be in a decline.
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