The GAO explains the debt ceiling

My column today was mostly about how the market would react to uncertainty about when and whether the government will raise its debt ceiling. But there’s a lot that I wasn’t able to get to in the piece, including what the government can do to stave the market off, how the budgetary process could be changed so we don’t keep getting pushed up to this abyss and why past successes at waiting till the last minute may not work this time. Luckily, this Government Accountability Office report has lots of detail on all those issues. You’ll learn, among other things, that:

l “Since 1995, the statutory debt limit has been increased 12 times to its current level of $14.294 trillion.”

l “Managing debt near the debt limit diverts Treasury’s limited resources away from other cash and debt management issues.”

l “The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.”

l “Treasury’s past success at managing cash and debt when near or at the debt limit is no guarantee that it can continue to manage successfully in the future and may be misleading. Given the size of current and projected borrowing needs, the extraordinary actions Treasury uses to manage debt near or at the debt limit will be more limited in coming years. As a result, once debt is at the debt limit, Congress will likely have less time to debate raising the debt limit before there are disruptions to government programs and services and to the Treasury market.”