The US national debt has surged by $572 billion since the suspension of the debt ceiling two weeks ago, following the enactment of the ironically named “Fiscal Responsibility Act of 2023”. This has pushed the total government debt past the $32 trillion mark. The Treasury Department is now selling a flood of Treasury securities to replenish its checking account, which had been nearly depleted during the debt-ceiling standoff.
The two types of US national debt, “nonmarketable” and “marketable” Treasury securities, have seen significant increases. Nonmarketable securities, which include the “I bonds” that Americans can buy and the Treasury securities held by government pension funds, have jumped by $96 billion to $6.86 trillion. Marketable securities, which the government sells via auctions to the public, have spiked by $476 billion to $25.2 trillion.
The Treasury General Account (TGA) at the New York Fed, which is the government’s checking account, has seen a surge in its balance since the suspension of the debt ceiling. The TGA balance has jumped by $227 billion, including the June 15 tax receipts, to a balance of $250 billion. However, these tax receipts are expected to be spent promptly, as they are every quarter.
The US government will require massive bond issuance in the near future, along with tax receipts, to replenish the TGA, pay off maturing securities, and fund the ongoing blistering budget deficit. This is happening simultaneously with the Federal Reserve’s Quantitative Tightening (QT), both draining liquidity from the markets.
Key Takeaways
- The Debt Ceiling Suspension’s Impact: The debt ceiling suspension has led to a significant increase in the US national debt. This has implications for the economy, including potential inflation and interest rate hikes.
- The Role of Treasury Securities: The US government is relying heavily on the sale of Treasury securities to replenish its checking account and manage its debt. This includes both nonmarketable and marketable securities.
- The Liquidity Drain: The simultaneous actions of the Treasury Department and the Federal Reserve are draining liquidity from the markets. This could have significant effects on the financial markets and the broader economy.
Thought-Provoking Questions
- What are the potential long-term effects of the US national debt surpassing $32 trillion?
- How might the sale of Treasury securities and the draining of liquidity from the markets impact the financial sector and the broader economy?
- What measures could the US government take to manage its growing debt and mitigate potential negative impacts on the economy?
