U.S. dips into pension funds as it hits debt limit
The National Debt Clock is seen February 19, 2004. The clock has since been redesigned to accommodate more figures.
STEVE CHIOTAKIS: Today's the day the federal government hits its $14.3 trillion debt limit. Even though the U.S. Treasury's buying some time until August by using a few accounting maneuvers. Up to now there's been no deal in Washington to raise the debt ceiling which could have some big ramifications going forward.
Ezra Klein is economic columnist for the Washington Post. Good morning.
EZTA KLEIN: Good morning.
CHIOTAKIS: So yeah, the official deadline is today, right? The $14.3 trillion ceiling has been met. But Treasury's doing a little smoke-in-mirror work right, to push the actual deadline back?
KLEIN: Right. Well, first Happy Debt Ceiling Day. It's a big day for us all. Treasury thinks they can delay this for about 11 weeks. And let's be very clear about what's happened here: Congress has previously passed laws which have resulted in bills for the country. And Congress has not given the Treasury the capacity to pay those bills. Now Treasury is about to liquidate various other types of borrowing stewing. So it's already liquidated a program to help state and local governments manage their finances. And now it is beginning to borrow from federal pension funds.
CHIOTAKIS: When you say liquidate, are you talking about selling, or just getting rid of it?
KLEIN: They're just getting rid of the program temporarily. So they're taking money they would've used form for that and moving it over to paying the country's bills. So they think they've got about 11 weeks of this type of moving money around. And that causes problems for people by the way -- that type of moving money around. But anyway 11 weeks and at the 11 week mark all hell breaks loose.
CHIOTAKIS: What kinds of problems has it caused people?
KLEIN: Well, state and local governments for one are loosing a product that has helped them sort of smooth out their finances over time. The federal pension funds -- they'll be fine if they're put back, but we're having now sort of intergovernmental borrowing. It creates different problems for the returns those pension funds would get. And as things go on, you basically have a Treasury with less and less capability to be flexible in what it needs it to do. So you know one thing as they begin moving money out of our crisis funds, but what happens if you have a international economic crisis during that period? So this is not how you want to run a business, a household, a government, really anything.
CHIOTAKIS: Is someone going to blink, do you think, in this game of chicken?
KLEIN: I think that we better hope so.
CHIOTAKIS: Ezra Klein, economic columnist with the Washington Post. Ezra thanks.
KLEIN: Thank you.