What the Department of Treasury Is: Congress established the Department of Treasury in 1789. It employs about 117,000 people, and
operates under a budget of $11 billion. It controls another $358 billion in tax credits and debt
financing. Unlike most other departments, 98% of the work of the Treasury is done by its 12 Bureaus.
These include the Internal Revenue Service, the U.S. Mint, and the Bureau of the Public Debt.
The remaining 2% of the work that is done by the Departmental Offices is also extremely
important, in that it is the office of the Secretary of the Treasury. The Secretary is responsible for
managing the current account deficit through selling Treasury notes and bonds. Since this controls
the value of the dollar, it impacts the entire global economy.
What the Department of Treasury Does: The Department of Treasury manages Federal finances once the President, Congress
and the Office of Management and Budget set fiscal policy. It does this by
collecting taxes via the I.R.S., and financing the public debt through Treasury bonds. It also advises
the Office of the President on financial, trade and tax policy.
The Treasury Department is also responsible for printing postage stamps, currency and coinage through the
U.S. Mint. It also enforces Federal finance and tax laws, as well as investigates and prosecutes tax
evaders, counterfeiters, and forgers. As part of this function it aids the war on terrorism by identifying
and freezing funds of terrorists.
How the Department of Treasury Affects the U.S. Economy: The most important way the Treasury Department affects the U.S. economy is through auctioning Treasury bills, notes and
bonds to pay for the U.S.
debt. The interest paid on the 10 year Treasury note, also called the yield, reflects the demand
for this type of government debt -- the more demand, the lower the yield. The lower the yield on the
10-year note, the lower fixed-interest mortgage interest rates are.
Low mortgage rates strengthen the
economy by:
- Allowing homebuyers to buy more and bigger houses, thus stimulating the real estate industry,
- Encouraging homeowners to borrow more against the equity in their house, which permits them to spend more on consumer products.
Strong demand for Treasury notes also means strong demand for U.S. dollars. This keeps the dollar strong, which keeps the price of imports low, reducing inflation. However, the large current account deficit threatens to reduce confidence in the dollar, which is starting to weaken. This will increase the cost of imports, aggravating inflation, but could also trigger a
dollar crash.
How the Department of Treasury Affects You: By issuing Treasury Bonds, Treasury affects you by influencing mortgage interest rates, which 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, the declining dollar will erode your
retirement savings to the point that you may have to keep working.
However, Treasury affects you more directly, as well. Every April, the I.R.S. expects a check from
you, unless it has withheld enough from your paycheck. You may also have U.S. Savings Bonds, or, if
you are concerned about inflation, you might own I Bonds which are from the Bureau of the Public Debt.
Last, but not least, Treasury affects you by printing bills, coins and postage stamps.
