There's something to be said about profiting off of the ill fortunes of others.
In late January, the U.S. Treasury Department warned Congress that the U.S. was fast approaching the statutory limit on the national debt ceiling, then $12.394 trillion. They said, by the end of February, that limit would be reached.
Congress said that if they failed to raise that ceiling, the nation would default. Why? Because, the nation is so far in debt, it had to borrow money just to keep up with paying down its principal, the interest owed on said debt, and financing the $1.556 trillion budget deficit.
Of course, it need not have defaulted. It could have simply cut spending drastically. But instead, they raised the debt ceiling so that the borrowing binge could continue unabated, by $1.9 trillion to $14.294 trillion.
So, how did the debt go from $11.850 trillion in 2009 to its current $12.6 trillion? Debt auctions. In particular, emergency Cash Management Bills that are frequently issued by the Treasury to keep the nation from an ever-looming default. The only way the Treasury can keep up with paying off the principal on the debt is to simply sell more treasuries.
Here’s how Answers.com defines a Cash Management Bill: “A short-term security sold by the U.S. Department of the Treasury. The maturity on a CMB can range from a few days to six months. The money raised through these issues is used by the Treasury to meet any temporary shortfalls.”
It’s akin to the cartoon character that has to run as fast as possible to keep from the ground collapsing right behind him.
Since the beginning of 2009, there have been 46 such emergency auctions, according to an Americans for Limited Government analysis of CMB sales from January 7th, 2009 until April 1st, 2010. That’s a lot of shortfalls.
In 2009, with 37 such auctions, that means the Treasury had a shortfall on average every 9.86 days. That’s how quickly the national debt is coming due. Less than every ten days — quicker than that really, if one counted all of the other Treasury auctions — more and more principal owed on the debt comes due.
But, no problem, says Congress — for now. As long as the auctions run smoothly, everybody keeps investing, and the people’s representatives keep raising the ceiling, taxpayers will never have to pay the debt principal in taxes. Because they couldn’t.
William Wilson is the President of Americans for Limited Government. He has spent his career working in political strategy and public affairs for various causes and organizations.