US Government Debt Different - Finance Department - University of ...

260The 2011 Debt Limit Impasse: Treasury’s Actions & The Counterfactual – What Might Have Happened if the National Debt Hit the Statutory Limitlimit, House Republicans insisted on matching spending cuts to correspondwith any debt limit increase and advanced a Balanced BudgetAmendment. 14 President Obama and congressional Democratspushed to include revenue increases in a deficit reduction measureand sought to protect entitlements. 15 Despite extensive negotiationsbetween President Obama and leaders of the House Republicans,an extension of the debt limit remained in doubt 16 until its ultimateresolution on August 2, 2011. 17B. Treasury Undertook Extraordinary Measures to Reduce theDebt Subject to the LimitIn anticipation of reaching the statutory debt limit, TreasurySecretary Geithner undertook a variety of financial maneuvers toextend the nation’s borrowing authority. On February 3, 2011,Treasury began to draw down its $200 billion SupplementaryFinancing Account at the Federal Reserve, 18 freeing up funds topay for appropriated expenses without new borrowing against thedebt limit. 19 This maneuver provided a reprieve before the debt limitof $14.294 trillion was reached on May 16, 2011. 20 Approachingand reaching the debt limit prompted Treasury Secretary Geithnerto take several “extraordinary measures,” including the suspensionof new debt issuances, the suspension of the investment of selectgovernment trust funds, and the redemption of securities investedin one government trust fund. These maneuvers provided Congress14See Wash. Post, How the Parties Fared in the Debt-Ceiling Deal, Aug. 1, 2011, http://www.washingtonpost.com/wp-srv/special/politics/debt-ceiling/debt-ceiling-deal/.15Id.16See Andrew Taylor, Passing Major Debt Deal by Aug. 2 Seems Doubtful, Associated Press,July 2, 2011, http://www.azcentral.com/arizonarepublic/news/articles/20110702debt0702.html.17Austin & Levit, supra note 2, at 218Press Release, Dep’t of Treasury, Treasury Issues Debt Management Guidance on the SupplementaryFinancing Program (Jan. 27, 2011) (available at http://www.treasury.gov/press-center/press-releases/Pages/tg1037.aspx).19See Treasury Direct, Daily Treasury Statements, Dep’t of Treasury, Feb 2, 2011 - May 15,2012, (available at http://www.fms.treas.gov/dts/index.html). On Feb. 2, 2011 the balance ofthe Supplementary Financing Program account was $199,963,000,000. On the day of the announcement,the balance dropped to $174,967,000,000, reflecting a $25 billion withdrawal.Periodic withdrawals continued until the balance hit $5 billion on March 24, 2011, where itremained until July 28, 2011 when the remaining money was withdrawn. As of May 15, 2012,this account has not been restored and it retains a $0 balance.20Austin & Levit, supra note 2, at 21.