U.S. government to hit debt ceiling earlier than expected

Treasury Secretary Jack Lew said Thursday he now estimates that “on or about” November 5, Treasury is likely to exhaust special accounting measures that are keeping the country’s debt below its legal limit.

Those measures would run out as of November. 5, when Treasury estimates that the federal government would have only $30 billion in cash on hand.

The federal government is now scraping just under its $18 trillion legal debt cap, with political wrangling over fiscal policy putting Washington at risk of not being able to pay its bills.

The tax payments were less than had been projected and a few government trust funds made larger-than-anticipated investments, reducing the money available to the Treasury, Lew said. The Treasury already came close to missing payments in 2011 and 2013 when Congress delayed increasing the borrowing limit. As Lew notes in the letter, “Without sufficient cash, it would be impossible for the United States of America to meet all of its obligations for the first time in our history”. Mr. Lew had previously estimated those measures would last until late October and possibly longer but refrained from giving a specific date because of a surge of tax payments due September 15.

The new deadline, more specific than earlier estimates, sets up a potential showdown between congressional Republicans and the White House amid a broader debate over government spending.

“But it does not increase the debt limit or alter the time we can continue to pay the nation’s bills”. Conservative lawmakers have cheered Boehner’s departure, and a few may now push even harder for the spending cuts that they’ve wanted in exchange for their votes to raise or suspend the debt ceiling.

Lew urged Boehner to move quickly to pass legislation raising the debt ceiling, warning that “there is no way to predict the catastrophic damage that default would have on our economy and global financial markets”. Moreover, we have learned from previous debt limit impasses that failing to act until the last minute and engaging in partisan brinksmanship can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.