If you’re an investor (and anyone with a 401k plan is), you’ve heard of the “Lost Decade”- The first ten years of this century where investing in the DJIA or S&P 500 produced little or no returns.  Recent media reports value the Government Shutdown’s lost productivity at upwards of $24 Billion, but I think it’s going to be more- Here’s why you’re about to see the “Lost Quarter” (remember, you read it here first on GubMints.com).  Continue reading

(c) 1999 20th Century Fox

Post Update 2/26/2013: TSP Funds made Whole by the Treasury Dept-  ‘G’ Fund ‘raid’ is over (for now).

(c) 1999 20th Century Fox
‘Whassup, G?’

Recently the TSP Director issued a statement reassuring TSP members that their investments in the G Fund are safe, and that any short term borrowing performed by the Treasury as a part of its ‘extraordinary measures‘ in dealing with the debt ceiling will not affect TSP participants.

He referenced the recent GAO report reviewing the recent raid on the G Fund.

For those who do not wish to read all 39 pages of the GAO report, the key findings are:

  • G Fund investors during the previous ‘raid’ were made whole, and that the Treasury Department borrowing against the G Fund is legal as “required by subsection 8438(g) of title 5, United States Code” (page 19).
  • Treasury Yield spreads drop during the ‘raid’ periods (page 22).

When yield spreads drop, it gets more expensive for the Treasury to borrow.   So while the effect on the TSP G Fund investor is negligible, the overall effect on the U.S. Taxpayer is increased cost.

 

Subscribe to GubMints:

 via RSS:  via Email:
Subscribe to GubMints via RSS Subscribe to GubMints via Email


 

As mentioned here, the next food fight in DC will be regarding the Debt Ceiling.  The Treasury Secretary is already taking extraordinary measures to continue to operate the US Government as we bump up against the current debt limit.

Many of you have heard the post-fiscal-cliff-deal-did-nothing-about-sequestration saber rattling of the impending Government Shutdown.  If you don’t already know, the first rule about Government Shutdown is- There is no Government Shutdown.

For those not fluent in OPM-ese, there are two types of furlough– The ‘Administrative Furlough‘ and the ‘Shutdown (aka Emergency) Furlough‘.

This discussion refers to the ‘Shutdown (Emergency) Furlough‘.

 As fallout from the two Clinton-Gingrich Government Shutdowns  of 1995-1996, most government agency heads got wise and put together boilerplate policies to enable their agencies to continue performing their core functions during the next inevitable government shutdown.  For example, during the 2011 threatened shutdown, the DoD issued this policy, which clearly states:

Operations and activities that are essential to safety, protection of human life, and protection of our national security, are ‘excepted’ from shutting down….Other excepted activities will include inpatient and essential outpatient care in DoD medical treatment facilities; emergency dental care; non-appropriated funds activities such as mess halls and child care activities; certain legal activities to support ongoing litigation and legal assistance for deployed DoD personnel; contracting and logistics operations that are in support of excepted activities; certain education and training activities to include the DoD education activity schools; and financial management activities necessary to ensure the control and accountability of funds. 

Furthermore:

…Military personnel are not subject to furlough and will report for duty as normal during the shutdown. Reserve component personnel should refer to the DoD Contingency Guidance document and to their chain of command for more specific information.

…Civilian personnel deemed to be performing excepted activities will continue to work during the period of a shutdown. 

Can you think of any DoD function left out here?  I can’t think of too many off-hand.  I’m singling-out DoD here because I’m an employee and pay the most attention to its Secretary’s instructions, but there are similar policies in place for State, Treasury, Justice, etc departments.

So for all the squawking and hype, my best read is that lawmakers have become wise that a  government ‘shutdown’ is a misnomer- It doesn’t really shut anything down and does not save the government a significant amount of $$.  Therefore, I believe an ‘Administrative Furlough’ is the more likely scenario in the upcoming Feb-Mar 2013 debt ceiling/sequestration showdown.

For further reading on a possible ‘Shutdown Furlough’, here’s a recent Washington Post primer on the guidance for the last proposed government shutdown.

The Next GubMints post will deal with the issue of the ‘Administrative Furlough’… standby!

Subscribe to GubMints:

via RSS: via Email:
Subscribe to GubMints via RSS Subscribe to GubMints via Email


On December 26th, while we were all busy recovering from the Holiday and headed out for year-end clearance sales, the Treasury Secretary dropped a surprise on us.   He announced that the federal government will once again hit its ‘debt ceiling’ on Dec 31st, and that the Treasury will take ‘extraordinary measures’ to stretch out its checkbook.

Interestingly, the most comprehensive breakdown I’ve found of the ‘extraordinary measures‘ is from the UK’s Guardian, not from a US-based news organization.  The four measures, listed in order of magnitude, are:

  1.  Stop investments in to the Civil Service Retirement and Disability Fund (CSRDF)- the CSRS annuity for retired and disabled CSRS participants (note: I am clueless on the CSRS retirement system as I am not a participant.  The link is informative, but an opinion piece).
  2. Suspending investments in to the TSP G Fund.
  3. Halt issuance of State and Local government securities (SLGS)
  4. Cease contributing to the Exchange Stabilization Fund (used to purchase foreign currency).

What #2 means to you and me is that, among other things, the Treasury Department will take out a 401k loan against your TSP balance.  Specifically, the Treasury will borrow from the G Fund and issue IOU’s to pay them back at a later date.

If this all sounds familiar, it is.  This is one of many extraordinary measures the Treasury took last time the nation neared its debt ceiling in May of 2011.  After the debt deal was reached in August of 2011 (which set up Sequestration, aka the ‘fiscal cliff’), the TSP G Fund balances were made whole.

What’s it mean to you and me?  Probably not much, as long as:

  1.  You don’t take personal offense at the Treasury Secretary raiding your individual retirement funds (Your TSP balance).
  2.  All past and present government employees and military participants in the TSP do not all sell-off their G Fund holdings at once.
  3.  Institutional Investors and sovereign nations continue to purchase US Government-issued debt.

The mechanics of how the G Fund is raided are described pretty well in this 2002 GovExec article, when the G Fund was about to be raided in order to avoid a what-seems-paltry-now debt ceiling limit of $6 Trillion.