US May Have Way To Cover Bills After Deadline, For Week

It turns out the federal government is sitting on some extra cash.

Thanks to an inflow of tax payments and maneuvering by the Treasury Department, the government can probably continue to pay all of its bills for several days after Aug. 2, providing potentially critical breathing room for Congress to raise the debt ceiling, according to estimates by several Wall Street banks and a Washington research organization.

The consensus is that the government will not run short of money until Aug. 10, when it would be unable to cut millions of Social Security checks without borrowing more money.

President Obama has described Aug. 2 as a “hard deadline” for Congress to increase the maximum amount that the government is allowed to borrow.

“We have to do it by next Tuesday, Aug. 2, or else we won’t be able to pay all of our bills,” Mr. Obama told the nation in his speech on Monday night.

Jay Carney, the White House spokesman, restated that position on Tuesday.

“That’s not a guess. That’s not a political opinion,” Mr. Carney said. “It is the judgment of career analysts at the Treasury Department. We give up our borrowing authority without action by Congress. And the result of that risks default for the United States for the first time in our history.”

That description, however, conflates two distinct events.

The government will exhaust its ability to borrow more money on Aug. 2, which is equivalent to maxing out a credit card. But there still will be cash in the federal wallet.

Some Republicans have expressed skepticism about the Aug. 2 deadline, describing it as an artificial line drawn by the Obama administration for political reasons. Analysts emphasize, however, that the deadline is real; it’s just the date that is inexact.

“Should policy makers wait till Aug. 10 to come to an agreement? If they can agree sooner, absolutely not. There are no definites in this case,” analysts for Barclays Capital wrote in a note to clients entitled “Is August 2 really ‘August 2’?”

Analysts also said that all of the estimates, including those from Treasury, were necessarily inexact, because they relied on variables like incoming tax payments. That means each passing day without a deal increases the risk that money will run out.

“This is more like predicting the weather than predicting the sunrise,” said Jay Powell of the Bipartisan Policy Center, a nonprofit in Washington that has analyzed the issue.

There are other risks in waiting. The Treasury must continue to repay debts as they come due, then borrow the same amounts anew. Officials are concerned that it will become harder to find investors for United States government securities, and that remaining buyers will demand higher interest rates.

The Treasury plans to auction about $87 billion in short-term securities next Monday and Tuesday. The following week it plans to hold a much larger auction of long-term debt.

All told, the government plans to borrow almost $500 billion in August. If interest rates climb by even a tenth of a percentage point, the annual cost would rise by $500 million.


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  • by Barbara on Jul 27, 2011 at 09:23 AM
    I don't understand why the government has to borrow money to cut the up-coming social security checks that are owed. The money should be right there--it's already been paid in by the people who are drawing it out now, right? Oh wait, I forgot, the government has been STEALING this money for years--they should all go to jail!
  • by ted Location: jacksonville on Jul 27, 2011 at 04:54 AM
    If congress cant agree on a compromise by the deadline & cause the taxpayers to have to pay more ,we need to throw all of them out no matter what party.
    • reply
      by Yea, I'm a vet on Jul 27, 2011 at 06:00 AM in reply to ted
      You're absolutely right. I wonder just how "catastrophic" this deadline really is? Remember when Bush had us all convinced that if we didn't invade Iraq they would be dropping nuclear bombs us in a couple years? We now know what a line of bull that was. Now with this "impending economic doom", I wonder if Obama is just doing the same thing? And "WOW" is right, let's not forget at $13 trillion in bailouts we spent a year or so ago. That was another "economic meltdown" that we had no choice to but to spend money to fix. That sure didn't help much, did it?
      • reply
        by uh on Jul 27, 2011 at 01:53 PM in reply to Yea, I'm a vet
        The credit crisis would be bad for the poor but not bad at all for the rich. Go figure.
    • reply
      by uh on Jul 27, 2011 at 09:58 AM in reply to ted
      I agree. More than a balanced budget amendment, I would like to see an amendment that says if congress does not establish a budget by a certain deadline for each fiscal year, all seats go up for election.
  • by Yea, I'm a vet on Jul 27, 2011 at 04:35 AM
    It's no secret what's causing our country's economic woes, it's the three undeclared wars we're involved in. Bring home our boys and girls and let's get back to the business of rebuilding this country. We really have no business over there anyways. We got Bin Laden, we made our point, forget about helping them -build a democracy-. Let's rebuild our own failing economy, education system, social security, etc. etc. Face it, the people in the middle east are never going to love us, but they will continue to do business with us cause they want our money. Let's get out of there before we have no economy to rebuild. Are people so stupid that they can't see what's really going on?
    • reply
      by WOW on Jul 27, 2011 at 05:11 AM in reply to Yea, I'm a vet
      did you ever think that if certain people (who shall remain nameless, as well as clueless) hadn't peed away $13T, that's trillion with a "T", on bailouts and stimulus packages that have yielded nothing, maybe we wouldn't be in such a pickle?
      • reply
        by droz on Jul 27, 2011 at 05:47 AM in reply to WOW
        The government has committed $13 trillion, but spent "only" $2.5 trillion. Not small change by any means, but you're misrepresenting the facts.
      • reply
        by Yea, I'm a vet on Jul 27, 2011 at 05:55 AM in reply to WOW
        Yea, that's true as well. I'm totally disgusted with both political parties. They've really made a mess of things.
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