With U.S. national debt at $18.15 trillion and suspension of the debt ceiling limit set to expire on Sunday, Treasury Secretary Jack Lew announced to Congress today that he will have to resort to “extraordinary measures” in order to keep the government from defaulting it’s creditors.
The “debt ceiling” law was first enacted in 1917 in order to set a limit over which the Treasury could no longer borrow money to pay out expenditures.
From USA Today:
“(The measures) include a halt to new investments in federal employee pension funds, a moratorium on deposits from state and local governments, and drawing down a $23 billion currency stabilization fund.
Lew did not say how long those measures would last. But the Bipartisan Policy Center, which tracks the finances underlying the national debt, estimates that the government will run out of borrowing ability completely sometime between Oct. 1 and Dec. 31.”
Sound bad? It could be worse. If all other methods failed, the government would be forced to sell assets such as it’s gold reserves or stock of companies bailed out during the latest financial crisis which Treasury now holds.
So, it looks like we’re headed for another show-down in Congress this fall, and with a House of Representatives that’s more conservative then it’s been in decades, the “nuclear option” (default) just might be in their playbook.