The Debt Ceiling Could Hit Sooner Than Anyone Thinks

National Journal ^ | 08/27/2013 | Patrick Reis and Matt Berman

[SeekAndFind]

The debt ceiling is a time bomb with a faulty timer: All of Washington sees it ticking toward default, but nobody knows exactly when it will explode. In a letter to House Speaker John Boehner, Treasury Secretary Jacob Lew projected that the department's "extraordinary measures" currently being taken to avoid default will be "exhausted in the middle of October."

From there, Lew writes, the United States would have only whatever cash Treasury has on hand, estimated to be about $50 billion. Lew calls that potential situation "unacceptable."

But Lew, like everyone else, is just working off his department's best guess.

Treasury doesn't get to pick a date for default. Rather, the department is subject to the ebb and flow of government revenues and expenditures. And those figures are anything but predictable, because how much the government owes its creditors on a given day—and how much cash it has to pay them—is based on a host of volatile economic, legal, and political factors.

"It's very difficult to tell, particularly this far out," when exactly Treasury would have to default on its debts, said Steve Bell of the Bipartisan Policy Center. "October is an extremely lumpy month. Some days, there's cash coming in; other days, there's cash going out."

And that unpredictability makes an accidental default all the more likely, Bell said, even if neither side wants it to happen.

"That's the danger. It's not that somebody plans to do this," he said. "It's that this is the time when it's very, very easy for mistakes to get made."

Bell, a former top Republican staffer on the Senate Budget Committee, cited a host of external factors that could shift Treasury's default date. Chief among them: an unexpected military action that would cost billions daily, such as the one many are calling on the Obama administration to undertake in Syria.

Another big question is whether Treasury can delay certain intergovernmental payments—such as contributions to the Medicare and Social Security trust funds—without running afoul of legal challenges. That is an open question, Bell said. "I don't know, and I just don't think anybody knows," he said. "It has never been tested before."

Even the standard daily variation in the number of bills Treasury deals with could change the equation, Bell said. "They do five [million] to 10 million transactions a day. A lot are big ones from Defense; a lot are tiny from repairmen. They are clumpy, and you put a few together, all of a sudden you're talking about" $4 billion to $6 billion.

The "middle October" deadline came about under artificial circumstances to begin with. In the beginning of this year, facing the "fiscal cliff," Congress made a deal to put off a deal on the debt limit until May 19. At that point, Lew told Congress he was beginning the "standard set of extraordinary measures" to keep the government funded. It's those measures that will run out sometime this fall.

In the summer of 2011, the U.S. almost found out exactly what happens when Treasury hits the ceiling. Looking at an early-August deadline, Congress was able to come to a deal to avert a default crisis only at the last minute. So what would have happened if that had fallen through? Unable to borrow money, by August, the Treasury Department would have been unable to pay almost half of its 80 million monthly payments. Based on how the department decided to prioritize payments, that could have included checks to the 29 million Social Security recipients that were due to go out on Aug. 3. By that date, Treasury would have already had an estimated cash deficit of about $20 billion.

And it's not as if all of the horrors of 2011 were averted. According to a Government Accountability Office report, just the delay in coming to a debt-limit deal alone resulted in a $1.3 billion increase in Treasury's borrowing costs for fiscal 2011.

As squishy as the deadline date is, it's really just a product of the malleable law that birthed it. Congress created the debt limit in 1939 in the run-up to World War II, largely as a means of giving Treasury a higher borrowing limit with more flexibility to help the war effort—a surprising origin for a law that has become Congress's principal point of leverage for extracting spending cuts from the Obama administration.

[John W]

Some of these numbers being bandied about would almost give you the idea this thing has gotten a little bigger than ever was intended.

[Daveinyork]

Let it hit.

[SkyPilot]

The "Fiscal Cliff" deal didn't deal with anything. It never touched the Sequester, which was a done deal by that time. All they did was delay it 60 days, and the Sequester does NOTHING to deal with our real fiscal problems, which are Entitlements.

And politicians of BOTH parties will not deal with runaway Entitlement spending because Takers vote, and Takers want their check or direct deposit.

The $60 Billion in tax raises enacted by the "Fiscal Cliff" deal were wiped out completely for the first year with the Sandy Storm pork giveaway ($60 Billion). Increases in just two Entitlement programs (Social Security and Medicare) for FY13 were also another $60 Billion, and that figure does not include all of our other Entitlement programs (TANF, Food Stamps, Medicaid, ObamaCare, etc).

The "extraordinary" measures that Treasury is taking include stealing from the CSRDF (civil service retirement and disability fund). That is the pension fund of the very federal employees that were just furloughed by their own government, taking 20% of their paychecks.

And they say ENRON had shoddy accounting? The people in government who are cooking these books should be in prison already.

[jdege]

We hit the real debt ceiling a couple of years ago, when we reached the limit of how much anyone would actually lend to us, and had to start pretending that they were lending to us, via accounting tricks like “Quantitative Easing”.

[null and void]

Not a chance. The debt hasn’t risen a dime in 100 days.

[LibLieSlayer]

It was hit the moment that the US Government stopped reporting it.

[fortheDeclaration]

There is no ‘debt ceiling’.

[SkyPilot]

There is a civil service investment plan called Thrift Savings Plan, or TSP. Since May, Treasury has admitted they have stopped investing the funds, and have instead “borrowed” against them. This would be akin to Chicago admitting it won’t report it’s actual real debt anymore, because it stole money from its own employees pension fund. This is the real reason they have frozen the debt clock.

[lurk]

Both Dems and Reps see the debt ceiling as a mere dangling cobweb to be swept aside.

[BwanaNdege]

Debt ceiling?

What debt ceiling?

We don't need no stinking debt ceiling!

/s

[Balding_Eagle]

Yes, THAT’S the answer. Just don’t restart the clock.

[New Jersey Realist]

Cut a couple billion from the White House budget; i.e., vacations, golf tournaments and 1st Lady staffing.

[AtlasStalled]

The U.S. surpassed its debt limit decades ago if you include unfunded liabilities.

[jacquej]

And, just what will happen if the Social Security checks don’t go out, or are late?

So many seniors are dependent on these to survive.

[Digger]

And, just what will happen if the Social Security checks don’t go out, or are late? So many seniors are dependent on these to survive.

Easy choice -fund all but ObamaCare & see if Big Ears will veto. CALL HIS BLUFF!!!