Amidst the irresponsible media blitz of US debt default talk is a handful of constructive, truthful information. Delving into only a portion of this available information reveals what is really going on and what could be happening if the two octogenarians in charge would finally end their two-year-long overage of spending (it is obvious who the octogenarians are, and one is late in her 8th decade if not 80 yet).
One tool that could be used immediately to address the continued paydown of US Treasury principal and interest is that of “rolling over” maturing US Treasury obligations by issuing new debt to pay off old debt. According to legal sources who have advised recent administrations of both major political parties, this type of debt paydown could even lower the amount of outstanding government debt subject to the “statutory limits” that would constitute exceeding the debt limit. This plan was established by the US Treasury back in 2011 when the last major showdown on the debt limit occurred.
Another major detail involves accounting tricks contained in the gigantic spending bills of the past 2½ years regarding “discretionary”, “mandatory” and “emergency” spending. An example cited in The Wall Street Journal* is $70 billion from the infrastructure bill passed in 2021 that was reclassified as “emergency” spending in 2023. There is more: from “mandatory” and “emergency” semiconductor spending to Inflation Reduction Acts and veterans affairs spending. These reclassifications (which could also be called fake labeling of spending) then are allowed to carry over to future years’ discretionary dollars, with no end in sight.
The reclassifications are causing a “walling off” by the White House of these discretionary dollars from debt negotiation talks. The amounts are near the $1 trillion mark, with estimates as high as $744 billion for fiscal 2023 and a possible $898 billion for 2024 – for only discretionary dollars! This does not even include military spending.
For non-Washington budget insiders and everyday working Americans, the available news and information has been misleading and concerning. The situation remains serious in terms of resolving a complex set of spending, budgetary, and governmental function issues. Time will tell how the situation is solved and progress can be made in practical, albeit painfully negotiated ways. Good thing there is a long weekend coming up.
*Conor J. Clarke, Kristin A. Shapiro; May 22, 2023. Editorial Board, May 23, 2023. WSJ.com.
Thank you for reading, Happy Memorial Day weekend and TGIF!
God bless America!