The U.S. Treasury Department is looking for new ways to alleviate its borrowing practices as the U.S. national debt reached $17.027 trillion.
President Barack Obama signed legislation on Oct. 17 to reopen the government along with suspending a $16.7 trillion cap on the national debt. Congress will usually set a borrowing cap each year in order to track when the government will be in the red. But under the new law, the debt limit has been given a deadline, opposed to the usual dollar cap. With the government shutdown coming to an end, President Obama, Congress and the Treasury Department can now set their sights on relieving the level of national debt.
U.S. debt continues to grow
The Treasury Department can continue to borrow to pay bills and other debts, until the cap is reinstated on Feb. 7. The cap will then reset to whatever the national debt is. But recent reports have shown that the national debt is rising at rapid growth.
On the first day of the federal government reopening, the U.S. debt added $328 billion worth of debt. The Washington Times reported that this is the biggest increase of all time, surpassing the 2011 record of $238 billion. The amount of debt the United States has accumulated has been steadily growing over the last few years. Last year, the national debt reached $16 trillion and the year before hit $14 trillion. As the current amount of debt has surpassed the $16.7 trillion cap mark, the Treasury Department is looking for ways to decrease it.
Replenish the economy
Although the country is still allowed to borrow, the Treasury Department does not want to raise the debt ceiling any higher than it has to. It has found a few ways to replenish the debt and create a little breathing room for the country.
The U.S. skimmed against the debt ceiling in May, but was able to delay surpassing it for five months thanks to some cost cutting 'extraordinary measures'. These measures give the Treasury some cushioning against an economic default. Reuters reported that these 'extraordinary measures' included the blocking of investments to federal workers pension funds. Along with halting pension investments, the Treasury could declare a debt insurance suspension period. Bloomberg said this would pause other investments and allow them to redeem Treasury securities in the Civil Service Retirement and Disability Fund.
Prosperous tax season would help economy
Analysts have said some of these accounting maneuvers can provide the government with $200 billion. This will be used to fund government operations until mid-April, when tax filings begin. But experts said these measures are only good for the short term.
"There is a 25 percent chance that the Treasury might be able to reach April 15 without a debt-ceiling increase," Lou Crandall, chief economist at Wrightson ICAP LLC, told Bloomberg. "If so, April tax receipts would push the debt-ceiling deadline into the latter part of the second quarter."
Other ways to help
If the government could extend its borrowing volume to mid-April, there is hope that they could get more help from other organizations. Freddie Mac, the government-controlled mortgage firm, was supplied with a government bailout in 2008. The mortgage firm, which has conducted business under the government since the bailout, could supply the national debt with a $30 billion payment later this year. Reuters reported that if the payment came before the debt limit is to be reset, it would have no impact
Alec Phillips, an economist at Goldman Sachs, said a fruitful tax season can help the country extend their cap freezing deadline.
"However, if revenues are higher than expected or tax refunds are lower than expected, the date could be pushed [out] slightly further," Phillips said.