It official, the United States has hit its Debt Ceiling today according to Treasury Secretary Timothy Geithner. So what about this august 2 deadline? Geithner has figured out he can stretch the existing Debt Ceiling until then by deferring required payments into various federal retirement funds. While he assures federal retirees that in no way would they feel any effect of the deferred payments, in fact he is incurring additional obligations with the federal government itself. Basically he is doing the same thing as if a home owner delayed paying their property taxes for a few months knowing that such a delay would not result in a default. Yet if a public company did exactly this, they would be required to post it as a liability on their balance sheet consistent with GAP.
Yes, I know this is government and the rules do not apply, and to try and figure out why the rules do not apply would kill far too many brain cells. Yet the question remains, why delay until August and not face the music today? Might it have something to do with the fact traditionally Congress is not in session then and the Administration may be hoping that members may cave in on their demands in order to take their summer vacations? Might it be that the news in August is generally dead and it is the lowest rated month for news outlets? Maybe it’s just the government tendency to never do today what can be delayed until tomorrow. Regardless, the Government is tapped out on its credit cards and needs to deal with the root cause now, not later.