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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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