Even though it’s so closely involved with the nation’s finances, the Treasury doesn’t set fiscal policy. The U.S. Constitution gave that power to Congress. Still, the Treasury has an enormous impact on the nation’s economy—and on you.
What the Treasury Department Does
In 1789, Congress created the Treasury Department and the other two executive departments of Defense and State. Today, most of the work of the Treasury is done by its 10 bureaus. Overseeing all of these activities is the Secretary of the Treasury. In their capacity as the chief financial officer of the federal government, they advise the president on all financial, economic, and tax policies. They also help set fiscal and budgetary policies.
How It Affects the U.S. Economy
The Treasury auctions Treasury bonds to pay for the U.S. debt. The 10-year Treasury note sets the benchmark rate for all other long-term debt. The Treasury yield reflects the demand for government debt. The greater the demand, the lower the yield. That reduces interest rates on fixed-interest 15-year and 30-year mortgages. Low mortgage rates strengthen the economy by opening the market to more home buyers and enabling them to buy bigger houses. That stimulates the real estate industry. Low rates also encourage homeowners to borrow more against the equity in their homes, which permits them to spend more on consumer products. If necessary, the Treasury borrows from federally managed retirement funds except for Social Security. It then starts to borrow from the Treasury notes purchased by the Federal Reserve. Once it exhausts these emergency measures, the Treasury must rely on incoming tax revenue to pay the government’s bills. For most of the year, that’s not enough. It may not be able to pay benefits to Social Security and Medicare recipients. Federal employees may have to be furloughed. If it couldn’t pay the interest on the debt, then the United States would go into debt default. Congress came close to allowing this when it created a debt crisis in 2011 and shut down the government in 2013, 2018, and 2019.
How It Affects You
The U.S. Department of the Treasury affects you directly. Every April, the IRS expects a check from you unless it has withheld enough from your paycheck. You may also have U.S. savings bonds. If you are concerned about inflation, you might own I bonds from the Bureau of the Public Debt. Most important, Treasury bonds influence mortgage interest rates. That affects your ability to buy and sell your home and to get equity loans. It also affects the value of the dollar, which impacts the cost of imports and inflation. Over the long haul, a declining dollar erodes your retirement savings to the point that you may have to keep working past 65. When demand is high, it keeps the price of imports low, reducing inflation. But the current U.S. account deficit could reduce confidence in the dollar’s value. That would increase the cost of imports, aggravating inflation. Worse, it could also trigger a dollar crash.
Finding Money That Belongs to You
If you think the government might owe you money, the Treasury Department has a page devoted to helping you find unclaimed money. The site has information about where to file claims for missing IRS refund checks, savings bonds, and Treasury bonds. It helps you track property from states you’ve lived in, class action suits, and unclaimed credit union shares. The U.S. Treasury Unclaimed Money website will help you find anything you might be owed.
