It’s that time again. Time for our friends in Congress to champion fiscal responsibility – by threatening not to pay the bill for money already spent. But this time we are in the middle of the fiscal cliff drama which could exacerbate any chance of a deal presently and certainly not by Monday.
Government borrowing will hit the debt ceiling on Monday, Treasury Secretary Tim Geithner said in a letter to Congress Wednesday.
As a result, the Treasury Department will soon start using what it calls “extraordinary measures” to prevent government borrowing from exceeding the legal limit.
Such measures include suspending the reinvestment of federal workers’ retirement account contributions in short-term government bonds…
But it’s unclear how much time the extraordinary measures can buy now because there are so many unanswered questions about tax and spending policies, Geithner said, referring to the lack of any resolution of the fiscal cliff.
And make no mistake, once the extraordinary measures run out default is a real option given the paralysis in Washington. Even just threatening to default lead to a credit downgrade the last time. Now we might technically default which, animal spirits pending, could cascade through the global economy given how vital U.S. T-Bills are to the entire system. A truly reckless game.
Photo by petejordan under Creative Commons license.