US Treasury to take steps to avoid borrowing limit

Published on NewsOK Modified: December 26, 2012 at 5:24 pm •  Published: December 26, 2012
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In 2011, Congress raised the limit to nearly $16.4 trillion from $14.3 trillion. Three decades ago, the national debt was $908 billion. But Washington spent more than it took in, and the debt rose steadily — surpassing $1 trillion in 1982, then $5 trillion in 1996. It reached $10 trillion in 2008 as the financial crisis and recession dried up tax revenue and as the government spent more on unemployment benefits and other programs.

In August 2011, the rating agency Standard & Poor's stripped the U.S. government of its prized AAA bond rating because it feared that America's dysfunctional political system couldn't deliver credible plans to reduce the federal government's debt. S&P decried American "political brinksmanship" and concluded that "the differences between political parties have proven to be extraordinarily difficult to bridge."

A year and a half later, the two political parties are still as deadlocked as ever.

Despite S&P's warnings and the political stalemate, investors still want U.S. Treasurys. Given economic turmoil in Europe and uncertainty elsewhere, U.S. government debt and U.S. dollars look like the safest bet around.

That is why the interest rate, or yield, on 10-year Treasury notes has fallen from 2.58 percent on Aug. 5, 2011 to 1.75 percent Wednesday.