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BILLION DOLLAR BURN: Debt-Ceiling Battle Cost The U.S. Government $1.3 Billion

Posted by Ram Kumar Shrestha on July 24, 2012


 

By Mark Gongloff

Here’s something for Congress to maybe think about the next time it decides to have a big, stupid argument about the debt ceiling: These big, stupid arguments, while entertaining, cost a lot of money.

How much money? The 2011 argument about the debt ceiling–the most recent battle–cost the U.S. government about $1.3 billion in extra borrowing costs, according to a new study by the Government Accountability Office, the nonpartisan congressional watchdog.

And that’s just the costs that the GAO bothered to count. There are also probably extra borrowing costs that the government is still paying this year and in future years because of the debt-ceiling debacle, but the GAO’s computer was too tired and/or depressed to try to figure those out.

“Many of the Treasury securities issued during the 2011 debt limit event period will remain outstanding for years to come,” the GAO said. “Accordingly, the multiyear increase in borrowing costs arising from the event is greater than the additional borrowing costs during fiscal 2011 alone.”

Wait, there’s more: The Treasury Department had to spend much of the year scrambling to raise cash to keep the government functioning while congressional Republicans held the debt-ceiling hostage. All of that plasma donation and selling of the government’s comic-book collection on eBay took 5,750 hours of Treasury employees’ time, including 400 hours of overtime, according to the GAO.

Now, the four of you who actually remember what happened to government borrowing costs during the debt-ceiling debacle might recall that they actually fell during the whole period of ridiculousness. The interest rate on the 10-year Treasury note dropped from about 3.5 percent to about 2.8 percent during the stretch the GAO calls the “debt limit event.” Two-point-eight is lower than 3.5, if my math is correct.

But here’s the thing: Everybody’s borrowing costs were falling that year, because the debt-ceiling fight made everybody nervous, and because Europe was, as usual, raking all of our money into a big pile and pouring kerosene on it.

Treasury’s borrowing costs fell, too, but they fell a little less than those of average corporate shlubs like Johnson & Johnson or General Electric, according to the GAO’s study. That extra bit of money the Treasury Department left on the table accounts for the $1.3 billion in money lost.

Another caveat: The GAO’s study ends on August 1, 2011, when the “debt limit event” (soon to be a little-watched NBC drama) ended. But there was a massive Event just a few days later, whenStandard & Poor’s stripped America of its AAA credit rating, in part because the country no longer seemed to be run by grownups but by Gremlins high on PCP. That blessed event led to even more economic fears, and Treasury borrowing rates absolutely collapsed. Did other borrowing costs fall more, adding to the government’s relative costs? The GAO doesn’t say.

But there’s no price tag you can put, really, on Congress’s debt-ceiling idiocy. Treasury rates plunged because everybody got worried all the sudden that the debt downgrade, along with Europe’s monetary pyromania, would lead to another recession. It didn’t, but another debt-ceiling fight that pushes the economy right to the brink of disaster won’t help matters. Regardless of the cost, we can’t afford another mistake like that one.

@HP

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