The national debt went up $38.7 billion in June. At first glance this doesn’t seem like a preposterous number, especially since it wasn’t long ago that the Bush administration was averaging more than sixty billion a month.

The total debt now stands at $8.868 trillion and the national debt limit is $8.965 trillion where it was set in March of last year. We are less than one hundred billion from the limit and it takes a vote of Congress to raise it. The administration definitely does not want such a vote to take place at this point in time or until the democrats are over their anger about the war.

To propose raising the national debt limit now would give the democratic majority an opportunity to do exactly what the republicans did to them in 1995/1996 – hold the government at ransom, even cause shutdowns, tie their hands until the other party gives in to what they want.  Government can’t do anything without money and that would give the democrats the upper hand in demanding troops out of Iraq or at least a timetable for doing so.

For the last two months or more the Bush administration has been juggling cash-on-hand, interest payments, and maturing securities trying to keep the debt down, to keep it from rising or rising too much, while things settle down with the democrats anger and frustration. This was not a simple task in June.

For one thing, half of the annual interest due entitlements such as Social Security, Medicare, and the Federal Employees Retirement System (FERS) was due in July. This amounted to almost $80 billion with $52 billion going to Social Security alone.

There’s no actual cash involved in these interest payments because these so-called “trust funds” hold only special nonmarketable bonds and are part of the Intragovernmental Holdings Pay-It-Again Sam scam. However, they do increase the overall national debt.

In June, the Intragovernmental Holdings (Entitlement) side of the debt went up $76.5 billion while the honest investor side of the national debt went down $37.8 billion. The only way the “Investor” side of the debt can be reduced is to pay off securities as they mature and not renew them. Normally, the treasury is able to renew securities almost as fast as they mature.

As long as the money needed can be taken from other programs like education and agriculture, it may be possible to continue the stall for another month, maybe even through August or the close of the fiscal year in September.

However, the one thing you can count on is that once Congress raises the debt limit, and they always raise it, they will make up for all of the money they didn’t borrow while in their austerity hold-back maneuver. Expect huge monthly increases as we approach another $500 billion plus annual debt increase.

The big test will be whether Henry Paulson's Treasury team can juggle things for another month or two and then, when it becomes imperitive to vote on a raise, whether the democrats will have the nerve to threaten the republicans. So far, no one has asked for an increase in the debt limit. Like everyone else, both sides are pretending it isn't happening.