Last summer’s fierce political debate over raising the federal debt limit cost taxpayers more than $1 billion in extra borrowing costs, including hundreds of hours in overtime for federal employees responsible for avoiding default, according to a new government report.
Delays in raising the debt limit forced the Treasury Department to pay an extra $1.3 billion in borrowing costs — and the final sum is expected to climb higher as multi-year obligations and other outstanding costs are added later, the Government Accountability Office said in a report released Monday.
The costs came as the Treasury suspended investments in several funds for federal employees, postal workers and other reserves to pay the nation’s financial obligations as policymakers squabbled over raising the debt limit. More money was later spent to restore the funds after the limit was increased, the GAO said.
The report concluded that “Congress should consider ways to better link decisions about the debt limit with decisions about spending and revenue to avoid potential disruptions to the Treasury market and to help inform the fiscal policy debate in a timely way.”
Lawmakers agreed last summer to raise the federal debt limit to $16.4 trillion, a $2.1 trillion increase that came with an agreement to cut a similar amount in federal spending over the next decade beginning in January. Both parties are now seeking alternative spending-cut plans to avoid steep cuts in military and non-defense spending.
In response to months of acrimonious debate, Standard & Poor’s dropped the nation’s AAA credit rating and blamed “political brinkmanship” for making the government’s ability to manage its finances “less stable, less effective and less predictable.”
The fighting also spurred thousands of hours in extra work for the Bureau of Public Debt, the tiny agency responsible for diverting funds to avoid exceeding the debt limit. Workers spent almost 5,570 hours working to avoid a default, including 1,200 hours in the weeks before the deadline “for meetings, preparation of parallel accounts and spreadsheets to use in tracking uninvested principal and interest losses, tests of the accounting system and training staff,” according to the GAO.
Then, the GAO said, the office spent 500 hours restoring the uninvested funds and preparing reports, while putting off other oversight duties and staff training programs.