The accounting fraud behind the debt ceiling

President Donald Trump's debt ceiling compromise with congressional Democrats earlier this month kept the government open through December and represented the first major bipartisan compromise of the administration. However, after an all-encompassing level of coverage in real time, the media quickly moved on to the next day's news cycle and interest in the debt ceiling waned. If you were to ask the average American today to recall what happened, the majority likely would tell you that the deal was a win for the nation.

Unfortunately, raising the debt ceiling yet again has resulted in rapid and entirely foreseeable financial consequences that are detailed in the ledgers of the U.S. Treasury Department's "Debt to the Penny" website. Just 24 hours after Trump signed the measure, a torrent of $317 billion in concealed—and technically unauthorized—government spending made its way onto official ledgers for the first time. In the last two weeks alone, that number hit a staggering $335 billion. This significant development is only the beginning of what's likely to be a tumultuous time for the country's fiscal health.

If you pull up historical national debt figures, there is a series of these dramatic spikes that coincide with debt ceiling fights across both Democratic and Republican administrations. Most recently, the debt limit was set at $19.9 trillion from March 15 until Sept. 8, 2017. If official Treasury Department statistics are to be believed, government finances held steady at that level for months. None of this accurately reflects the financial position of the federal government. It actually was an artificial freeze that was accomplished using accounting gimmicks and an aggressive cash management strategy on the part of Treasury Secretary Steve Mnuchin.

Legally, the government was not able to borrow more money, but the Treasury did have a toolbox of "extraordinary measures" at their disposal to pay for government expenses without counting the dollars as official debt. Extraordinary measures are difficult to explain to the non-accountant type, but you can think of them as using one credit card to pay off another.

The simplest extraordinary measure involves temporarily looting the federal employees' retirement fund to pay for day-to-day government operations. The Treasury can "borrow" from this $225 billion fund and spend it without moving the official national debt by one penny.