Treasury Secretary Tim Geithner announced earlier today that the government has reached the debt ceiling, and that the Treasury was entering a "debt issuance suspension period." In other words, the Treasury cannot legally auction any more bonds.
Until Congress votes to increase the debt ceiling, the Treasury has to prioritize spending. Geithner's first action will be to suspend payments to Civil Service Retirement and Disability Fund and the Government Securities Investment Fund ("G Fund"). The practical effects of these measures will be very slight -- both of the funds will be made whole once the debt issuance suspension period has ended.
In fact, Bush Treasury secretary John Snow took the same steps during the most recent debt limit impasse. By suspending payments to the CSRDF and the G Fund, in addition to taking funds from the Treasury's Exchange Stabilization Fund (kept for emergency interventions into foreign exchange markets), the Treasury was able to maintain the government's activities without any trouble from February 20 to May 27, 2003.
Similarly, when the government reached the debt limit today, the bond markets took no notice. And if they had already priced in the near-inevitability that the debt limit would be reached, that price was a very low one.
There are a number of remaining measures for the Treasury to take before the real dire options, such as withholding Social Security checks or military paychecks -- become possibilities.
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