Now we can add this to the drama in Washington:
In 2011, the US debt ceiling was raised from $14.3 trillion to $16.4 trillion. And as we ring in the New Year, we are set to run right into that $16.4 trillion limit.
Last week, Treasury Secretary Tim Geithner wrote a letter to Congress with a warning: “I am writing to inform you that the statutory debt limit will be reached on December 31, 2012, and to notify you that the Treasury Department will shortly begin taking extraordinary measures authorized by law to temporarily postpone the date that the United States would otherwise default…”.
Those ‘extraordinary measures’ will create something like $200 billion in headroom…but given that the US adds to the debt by borrowing $100 billion every month that will only buy a couple of months’ time. And even that is iffy – because of the fiscal cliff, it is “not possible to predict the effective duration” of emergency measures.
Because the debt limit is set by Congress, Geithner’s intent is to force lawmakers to act.
Of course, this is no surprise. Hitting, and increasing, the debt ceiling is nothing new.
A few decades ago, the national debt was $908 billion. It hit $1 trillion in 1982. It hit $5 trillion in 1996. And since 2001, it has been on an upward trajectory: the limit has been increased 13 times.
Back in August of last year, as Washington played a very public game of “chicken” before increasing the debt ceiling, Standard & Poor’s stripped the US of its AAA bond rating. At the time, the agency said that “political brinkmanship” was the problem.
Some things never change.