As Debt Limit Approaches, Cracks Appear in Nation’s Finances

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Emily Flake

With no obvious solution on the way from Congress, the U.S. is approaching a fiscal crisis, and it’s impossible to say when it will begin to adversely affect the economy. Unless lawmakers allow his department to borrow more money, Treasury Secretary Jack Lew has warned that as of about November 3, the U.S. government will begin operating on a cash basis – something that could lead to a first-in-history default on the financial obligations of the United States.

The November 3 date, however, suggests that everything will be just fine so long as something happens by 11:59 on November 2. An announcement by the Treasury Department on Thursday, though, showed why that is manifestly not the case.

Related: What’s Really Driving the Stock Market’s Big Rebound Rally?

The Treasury sells billions of dollars in government-backed securities every week, from short-term bills to medium term notes, up to the 30-year “long bond.” Sometimes this is done to take on more debt, other times it is done as a management tool, allowing the Department to distribute the government’s obligations over different maturities as cost and need require.

 

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