US gov't $25 mln from debt ceiling

WASHINGTON, Feb 17 (Reuters) - The U.S. government has moved to within $25 million of its $8.184 trillion debt ceiling, the Treasury said on Friday, but it expects to stay below the limit for up to another month through stop-gap cash flow measures. The Treasury said its total public debt subject to the statutory debt limit rose $10.03 billion on Thursday to $8,183,975,000,000. Treasury Secretary John Snow, who has urged Congress to raise the debt limit, has said stop-gap measures could keep the government from defaulting on its financial obligations until mid-March. On Thursday, the Treasury said it would dip into a federal pension system fund by curbing daily reinvestments of the fund's assets in order to stay below the debt limit. Each day, the Treasury will retain a sufficient amount of the Government Securities Investment Fund, known as the "G-Fund," to keep below the debt limit, Treasury spokeswoman Brookly McLaughlin said on Friday. She added that once the debt limit is raised, the Treasury will return the funds to the G-Fund and provide reimbursement for any lost interest earnings. The G-Fund, which had $65.27 billion in it as of the end of January, is typically reinvested daily by the Treasury. The Treasury also this week suspended sales of state and local government non-marketable securities, or SLGS, as a means of limiting its cash outflows. SLGS are sold to municipal bond issuers for the reinvestment of bond proceeds. McLaughlin declined to say when the Treasury may take other actions to keep below the debt limit. The Treasury also has said it could tap into the federal government's Exchange Stabilization Fund and the Civil Service Retirement Fund. The government's debt ceiling has been at its present level since November 2004, when Congress lifted it by $800 billion. Senate Finance Committee Chairman Charles Grassely, an Iowa Republican, said on Tuesday that the Senate might wait until mid-March to raise the debt ceiling.

Just to put this in perspective, with the population of the US at 295,734,134 (last CIA factbook), this means that every man, woman and child in this country owes China, Japan, et. al. $27,673.42! Now, the debt-ceiling could be a short-term cashflow issue, and I'm sure the Dems will jump all over it as an example of Bush's financial mismanagement in order to keep their constituents righteous, but the debt-ceiling issue is small potatos compared to the real issue of the magnitude of the debt. With a median liquid net-worth (aka, home equity not included -- you gotta live somewhere!) of $18,000 or less ($10,000 and $5,000 for blacks and latinos, respectively), can anyone see why I'm so worried about foreign central banks' USD holdings? If China decides to stick it to us or the petrodollar regime collapses (either will do), you'll be seeing US Prime Rates of 15%, the retail sector (and retail-sector employment) imploding due to credit standards tightening like a noose, and the "wealth affect" of all that home equity evaporating as foreclosures of mortgages over the magic "80% of equity" begin.

We won the cold war because we forced Russia to spend as much as we did when Russia didn't have the petrodollar advantage to tamp down the real cost of their money. We must return to pre-Cold War spending habits before the vultures come home to roost, or we're screwed.

In the interim, boys and girls, pay down those mortgages!