The Treasury Department hit its debt ceiling on January 21, meaning it can no longer borrow additional funds. While some may view this as a positive development, the reality is more complicated. To work around this limitation, Treasury Secretary Janet Yellen has declared we are in a "debt issuance suspension period." In other words, we’ve hit our credit limit, but we’re using accounting gimmicks to pretend we haven’t.
To keep the government running, Yellen is relying on "extraordinary measures"—temporary actions such as suspending investments in government retirement funds like the Postal Benefits Fund (PSRHBF) and the Civil Service Retirement and Disability Fund (CSRDF). In essence, the Treasury is using these trust funds as temporary sources of liquidity during a debt ceiling crisis. Rather than making the required contributions to these funds, the Treasury diverts the money to other government needs, effectively delaying their intended growth.
In the private sector, especially for companies with defined-benefit pension plans, a similar approach may be taken when there is financial stress or liquidity issues. If a company faces financial difficulties, it might temporarily suspend or reduce contributions to its pension fund until conditions improve. This is parallel to the Treasury’s actions with the PSRHBF and CSRDF, though the circumstances and mechanisms differ. One key difference is that private companies, unlike the Treasury Department or state and local governments, are bound by federal law, specifically the Employee Retirement Income Security Act (ERISA), which mandates minimum funding standards for pension plans. As a result, any suspension or reduction of contributions could put a company at risk of violating these regulations.
The creative accounting maneuvers used by the Treasury Department allow the government to continue operating without breaching the debt limit, but they are only short-term fixes. Once the debt ceiling is raised, these measures must be unwound, resulting in a massive increase in debt. For example, just two days after Congress suspended the debt ceiling on June 3, 2023—allowing for unlimited borrowing until January 1, 2025—the debt spiked by nearly $358 billion in a single day. This contrasts sharply with the time before 2000 when the government borrowed less than that in an entire year.
The debt ceiling was put in place to ensure that the Treasury borrows only what Congress has authorized. However, these accounting gimmicks allow the Treasury to circumvent the debt limit during the "suspension period" and continue spending. Once the ceiling is lifted, we face an immediate spike in debt, often exceeding hundreds of billions of dollars in a matter of days. This creates an unsustainable trajectory that burdens future generations with the consequences of today's fiscal irresponsibility.
Why even have a debt ceiling if the Treasury can bypass it with accounting tricks and Congress continually raises it when it overspends? Since 1960, Congress has raised, extended, or revised the debt limit 78 times, undermining the very concept of fiscal discipline. If the government were required to adhere to a hard debt limit, we might finally see real accountability in federal spending. Instead, we’re now burdened with such massive debt that annual interest payments exceed $670 billion. This cycle of fiscal irresponsibility and short-term fixes only delays the inevitable, leaving future generations to foot the bill.
Unfortunately, the national debt is much larger than we are told. While the current debt ceiling stands at $36.2 trillion, this figure does not reflect all the debt the U.S. government is obligated to. It excludes $50 trillion in promised Social Security benefits and over $66 trillion in promised Medicare benefits, which are not accounted for in the debt or the federal balance sheet. If these liabilities were included, the true debt would exceed $150 trillion. How can Congress effectively manage the nation’s finances when Treasury’s accounting practices obscure the full extent of what’s owed?
The reasoning behind this exclusion is that the government believes it only owes benefits that are due next month. In a hearing before the Federal Accounting Standards Board, Steve Goss, Chief Actuary, of the Social Security Administration, stated, “An overriding uncertainty exists under the Social Security (and all Federal Social Insurance) programs. This is the Government’s right and ability to alter potential future benefits. Until benefits become due and payable, there is no binding commitment over which a worker has control and so no liability can be recognized.” This is certainly news to most people.
This approach is dishonest and flawed, as it ignores the long-term obligations that will eventually come due, exacerbating the nation's fiscal challenges. It’s time for real change. The current practice—relying on accounting gimmicks to bypass the debt limit and hide the full extent of the debt—is reckless and unsustainable.
The Department of Government Efficiency should begin by urging Congress to reform government accounting practices and demand real, long-term solutions to our fiscal challenges, rather than continuing this cycle of short-term fixes and accounting tricks. Accountability, transparency, and responsibility are the only ways forward if we are to ensure a stable and sustainable financial future for the United States. It’s time for our leaders to stop kicking the can down the road and face the truth: the current approach is a fiscal time bomb that will only grow with each passing year.