Terence P. Jeffrey: “Treasury Forced to Issue $1T in New Debt in First 6 Weeks of FY14” – CNS News

Posted on :Nov 19, 2013

By: Terence P. Jeffrey

CNS News

November 19, 2013

(CNSNews.com) – Between Oct. 1, 2013, the first day of fiscal 2014, and Nov. 14—which  was less than a month after Congress agreed to temporarily suspend the  legal limit on the federal debt—the Treasury was forced to issue more  than $1 trillion in new debt.

During that time, according to the Daily Treasury Statement-, the  Treasury issued $1,014,215,000,000 in new bills, notes, bonds and other  securities.

The government needed this $1,014,215,000,000 to cover government  obligations and expenses that exceeded the $255,080,000,000 it raked in  through tax revenues during the same six-week period.

Where did that combined $1,014,215,000,000 in newly borrowed money and $255,080,000,000 in new tax revenues go?

The lion’s share went to payoff maturing securities the Treasury had sold before and had now come due.

In total, according to the Daily Treasury Statement, the Treasury  needed to redeem $879,734,000,000 in maturing debt during the first six  weeks of the fiscal 2014.

After that, the government’s biggest expenses were $98.853 billion in  Social Security benefits, $77.704 billion in Medicare expenses, $35.304  billion to Defense Department vendors, $34.623 billion for Medicaid,  $20.537 billion for the salaries for federal workers (who have now been  compensated for the time they missed during the partial shutdown),  $20.155 billion for the Department of Education, $13.060 billion for the  Department of Agriculture’s Food and Nutrition Service (which includes  the food stamp program), $11.152 billion in Health and Human Services  Department grants, $10.648 billion for Housing and Urban Development  Department programs, and $9.172 billion to buy insurance for federal  employees over and above the $20.537 billion they were paid in salaries.

The Treasury also had $67.234 billion cash on hand at the close of  business on Nov. 14–but that was down $21.152 billion from $88.386  billion cash on hand the Treasury had when the fiscal year started Oct.  1.

So, in addition to the $1,014,215,000,000 in new borrowing the  Treasury undertook in the first six week of fiscal 2014, it also drew  down its cash by $21.152 billion.

When Treasury Secretary Jacob Lew appeared in the Senate Finance  Committee on Oct. 10 and called for Congress to increase the legal limit  on the federal debt, he lamented that people do not understand that the  Treasury needs to constantly borrow new money to meet ongoing expenses  and pay off the tremendous volume of old debt that must be redeemed.

“Every week we roll over approximately $100 billion in U.S. bills,”  Lew testified. “If U.S. bondholders decided that they wanted to be  repaid rather than continuing to roll over their investments, we could  unexpectedly dissipate our entire cash balance.”

“There is no plan other than raising the debt limit that permits us  to meet all of our obligations,” Lew said later in that hearing.

“Let me start by saying what I think should be obvious: that if we  don’t have enough cash to pay all our bills, we will be failing to meet  our obligations, and under any scenario we will be defaulting on  obligations,” said Lew.

“Let me remind everyone,” he said, “principal on the debt is not  something we pay out of our cash flow of revenues. Principal on the debt  is something that is a function of the markets rolling over.”

Lew’s description of the way the government handles its  now-$17-trillion-plus debt mirrors the Securities and Exchange  Commission’s definition of a Ponzi scheme.

“A Ponzi scheme is an investment fraud that involves the payment of  purported returns to existing investors from funds contributed by new  investors,” says the Securities and Exchange Commission’s definition.

“With little or no legitimate earnings, the schemes require a  consistent flow of money from new investors to continue,” said the  SEC. “Ponzi schemes tend to collapse when it becomes difficult to  recruit new investors or when a large number of investors ask to cash  out.”

To keep the government in cash during fiscal 2013, which ended on  Sept. 30, the Treasury had to sell $8,323,949,000,000 in new debt. The  government’s single larget expense in fiscal 2013 was paying off   $7,546,726,000,000 in debt that matured during the year.

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