Many people may recall the debt/deficit debate that raged in the Federal government last August. The agreement that was reached included extensive budget cuts, a new national debt ceiling, and a clause prohibiting further debt ceiling increases unless certain budget cut trigger points were reached.
While nearly $1 trillion in budget cuts have been identified, spread out over the next decade plus, the trigger points have still not been met. Under current projections, the U.S. government will run out of money sometime towards the end of the year, perhaps in November or December.
The U.S. Treasury, along with it’s enforcer, the IRS, is pulling out all the stops to make available debt limits last as long as possible. In other words, the Treasury is stepping up enforcement, to collect as much money as humanly possible from as many sources as possible. Revenue Officers, the government’s collections agents, are under more and more pressure from their management to bring in as much money NOW as they can.
As an example, just two weeks ago a Revenue Officer issued a levy notice against one of my client’s banks, in an effort to seize any money that was in there. Fortunately, the account was nearly empty, and the IRS only took a few dollars out of the account. The problem was that this client is on an active payment plan and is compliant with current deposit and return filing requirements. Under these conditions, it is actually a violation of Federal law for the IRS to issue a levy and forcefully take money. My client has a legitimate claim to sue the U.S. government if he chose to, and no judge would rule in favor of the Feds.
In addition to actions like this, the Treasury is also trying to identify other sources of funds to extend the inevitable. The Treasury has been raiding the Social Security Trust Fund for decades, to the point where that trust fund doesn’t actually exist anymore, and all payroll taxes collected by the government that should be going into the Social Security fund actually go to pay current benefits and into the general fund.
Now, the Treasury is looking to raid other Federal pension funds. These are funds set aside to monthly benefits for Federal retirees, including both civil service and military pensions.
Yes, if you are a Federal retiree, your pension fund is going to be “borrowed from” later this summer in order to fund Federal government operations.
This sort of thing is going to continue until there is nothing left to borrow from. With the U.S. dollar on a path to be removed as the world’s reserve currency, the value of the dollar will continue to plummet, and there will be fewer and fewer buyers for U.S. Treasury debt.
If you haven’t already started, I would encourage you to start looking towards ways to hedge yourself against the inevitability of the U.S. reaching the same point that Greece and several other countries are already in. In future, I will be writing more and more about this topic, and we will be covering this topic quite a bit in the monthly Taxing Times Premium subscription newsletter.