Government nears debt ceiling again; TSP funds could be tapped

The federal government is expected to hit the $6.4 trillion debt ceiling Thursday, but the Treasury Department, as it has done in years past, will use a host of budget tools to ensure that the government remains solvent until Congress can pass legislation raising the statutory debt ceiling, a department spokeswoman said today.

In the past, such tools have included suspending investments in federal retirement funds.

With Congress out this week, it is unlikely any action will occur until at least March, as congressional leaders are still mulling their plans for what has been a politically difficult vote for lawmakers.

This year, House Republicans attempted to make the vote easier for lawmakers by reinstating the so-called Gephardt rule, which allows the vote on the annual budget resolution to automatically raise the statutory debt limit.

Once the budget resolution is passed, the House clerk enrolls a second resolution raising the debt limit, and it is then sent to the Senate. The Senate can either approve it and send it to the president, or force a conference with the House by demanding a different statutory limit.

Twice last year, the Treasury Department suspended daily investments of billions of dollars of federal employees' retirement funds to avoid breaking the debt ceiling.

The suspension affected investments in the Civil Service Retirement and Disability Fund and the Thrift Savings Plan's G Fund. Federal employees and retirees didn't see any changes in their pensions or TSP accounts due to the accounting maneuver, however. Treasury is required to keep track of the interest the funds would have earned had the investments taken place and repay the money after debt crises pass.