The federal government hit the official debt ceiling today. Which means the Treasury Department can’t sell more bonds to raise cash t pay the government’s bills.
Unless it finds a way to finesse the debt limit.
The first steps of an effort that Treasury Secretary Janet Yellen has told Congress could postpone a potential government default until June or so fell into place today. The Treasury is deferring payments into two government-run retirement funds to cut outlays and to do an end run about the debt limit accounting rules.
The deferrals involve the Civil Service Retirement and Disability Fund, which provides defined benefits to retired and disabled federal employees, and the Postal Service Retiree Health Benefits Fund, which provides postal-service retiree health-benefit-premium payments.
Deferring the payments will lower Treasury’s need to borrow. (It will also help on debt limit accounting since the Treasuries held by these funds count against the federal debt limit.) This isn’t the first time that Treasury has used deferrals on payments to these funds to avoid triggering a debt ceiling default. So these are tried and true plays in the Treasury debt ceiling playbook. (The funds will have to be repaid in the future–assuming that Congress does eventually raise the debt ceiling.)
From here, though, each step takes the Treasury a little further into more unfamiliar territory.