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6 degrees of sequestration

U.S. pays down debt for first time in six years

Nancy Marshall-Genzer Apr 30, 2013
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6 degrees of sequestration

U.S. pays down debt for first time in six years

Nancy Marshall-Genzer Apr 30, 2013
HTML EMBED:
COPY

The Treasury Department is expected to start paying down U.S. government debt this quarter for the first time in six years.

With April tax payments rolling in and a squeeze on government spending due to the federal spending cuts known as sequestration, the Treasury had enough cash this quarter to make a $35 billon debt payment.

While it sounds like good news, not all economists are celebrating.

Mark Zandi, chief economist at Moody’s Analytics, says we should spread out this year’s spending cuts over three to five years.  Otherwise,  sequestration hits all at once.

“If that causes the overall economy to grow too slowly, then of course, we’re going to start generating less tax revenue, and then, of course, people aren’t going to find jobs and there will be higher unemployment and that affects government spending,” Zandi says.

That’s because the unemployed would start applying for various government benefits. 

And, by the way, the Treasury Department says we’ll be back to borrowing in the third quarter — from July to September. The Treasury expects to borrow $223 billion over those three months.

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