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Chipping Away at the National Debt

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April 30, 2013

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Yesterday the U.S. Treasury announced that it would pay down a small portion of the national debt, by a net amount of $35 billion. The debt reduction is a temporary effort that will likely give Washington a bit more flexibility and time during the debt ceiling debate that will take place in the next few months. The pay down will mark the first time in six years that the government has paid down net marketable debt.
Why is this happening now? In the spring, the federal government tends to take in a higher level of tax receipts. According to NASDAQ, this year the boost was attributed to higher payroll taxes and rates for wealthier households, improved wages and delays on individual income-tax refunds. Budget cuts have also helped to decrease federal spending slightly and lower the projected deficit.
While the news is positive sign that the Treasury is making an effort to use tax revenue responsibly, the pay down is a very small percentage of the U.S.’s overall debt. The national debt rose by $1.28 trillion in fiscal year 2012, an average increase of $3.5 billion per day. The Treasury payment of $35 billion is just about 6 percent of the $598 billion added to the debt since the beginning of this fiscal year, and just a small portion of the $192 billion in the interest obligation that has accumulated from this year’s borrowing. And according to the Treasury, it still expects to borrow a net $223 billion in the July-to-September period.