The Washington PostDemocracy Dies in Darkness

For federal employees, debt ceiling approach follows familiar path

Placeholder while article actions load

For fiscal crisis-weary federal employees, the looming federal debt ceiling fight has the feel of déjà vu all over again.

The Treasury Department has warned that it “will be forced to use extraordinary measures to continue to finance the government” unless Congress acts by Friday, when the limit — temporarily suspended by a law enacted last year — goes back into effect.

One of those extraordinary measures, which in practice has become ordinary, involves the largest of the investment funds in the 401(k)-style retirement savings program for federal employees, the Thrift Savings Plan.

The TSP’s government securities fund, or G fund, consists of special-issue Treasury securities available only in the TSP. As of December, the fund accounted for $173 billion of the $397 billion in investor accounts. In a “disinvestment” period, the Treasury stops issuing those securities, in effect taking that debt off its books and freeing up operating money.

Over the last two decades alone, the Treasury has used the maneuver in 1995-1996, 2002, 2003, 2004, 2006, 2011, 2012 and 2013. Two separate disinvestment periods last year together covered about half the year.

“As always, we want to remind our participants that the G fund will be made whole once the debt ceiling issue is resolved and that participants will not lose a penny, thanks to the statutory protections afforded to the TSP,” spokeswoman Kim Weaver said in an e-mail.

Account balances continue to accrue earnings, and loans and withdrawals are not affected. When the period ends, the securities are reconstructed as if the suspension had not occurred.

The Treasury meanwhile has cautioned that even invoking those procedures will provide only enough operating money through about the end of this month.

Approaching the debt ceiling also raises concerns about unpaid furloughs of federal employees, this time coming on the heels of two recent rounds of furloughs. The first, triggered by sequestration budgetary limits, stretched over last spring and summer; affected employees were not paid for the time off. The second was due to a budgetary deadlock that caused a partial government shutdown in early October; both employees who stayed on the job unpaid and those who were sent home later received back pay.

A Congressional Research Service report, though, says that a lack of appropriations is a “substantially different situation” than breaching the debt ceiling. It noted that the government would continue to pull in revenue from taxes and other sources and could continue to incur obligations to make payments, such as employee salaries. However, CRS added, the government could be forced to decide whether to pay obligations in the order they come due, or whether to prioritize some over others. It said there are practical and legal issues involved in both.

Regarding potential furloughs, the report cites this assessment from the Congressional Budget Office: “Failing to raise the debt ceiling would not bring the government to a screeching halt the way that not passing appropriations bills would. Employees would not be sent home, and checks would continue to be issued. If the Treasury was low on cash, however, there could be delays in honoring checks and disruptions in the normal flow of government services.”