U.S. government may not hit debt limit until October: analysts

WASHINGTON Fri Apr 26, 2013 5:52pm EDT

President Barack Obama speaks about the sequester after a meeting with congressional leaders at the White House in Washington March 1, 2013. REUTERS/Kevin Lamarque

President Barack Obama speaks about the sequester after a meeting with congressional leaders at the White House in Washington March 1, 2013.

Credit: Reuters/Kevin Lamarque

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WASHINGTON (Reuters) - The United States might not hit the statutory limit on its debt until October, a policy research group said on Friday, giving Republican lawmakers more time to extract spending cuts from the Obama administration in return for extending the borrowing cap.

After giving into Democratic demands in December to raise taxes and later working with them to avoid a government shutdown, Republicans have been gearing up to use the debt limit as leverage to seek fresh budget cuts and changes to the tax code.

The Bipartisan Policy Center, a Washington think tank that analyzes the Treasury's daily and monthly cash flows, had expected the federal government to hit the congressionally-set limit on its debt sometime between early-August and mid-September.

But stronger-than-expected revenues and deeper-than-anticipated budget cuts mean the ceiling on borrowing probably will not be reach until sometime between mid-August and mid-October, the group said on its website on Friday.

"October is a nasty month," BPC economic policy director Steve Bell said in an interview, noting that major government payments are due in October.

If Congress does not raise the borrowing cap before the Treasury hits the limit, the government will no longer be able to borrow money to pay its bills, including interest on its bonds, raising the risk of a damaging debt default.

In an attempt to avoid being blamed for a default, Republicans in the House of Representatives are pushing legislation to require the Treasury to pay bondholders and Social Security retirement benefits before other bills if Congress does not raise the debt ceiling on time.

The BPC said its forecast could change depending on economic conditions and when updated financial information became available.

Nearly $90 billion may soon be pumped into government coffers by the now-profitable government-controlled housing finance firms Fannie Mae and Freddie Mac to account for deferred tax assets that were written down.

The think tank, however, does not think the disbursement to the Treasury will be that high. "We do expect that there will be a payment of some size in June but it is our opinion that the number is more likely to be in the $20 billion range and not in the rumored $100 billion range," Bell said.

The Treasury has said it could not forecast an exact date for when Congress must raise the debt ceiling due to delayed tax filings and uncertainty about the effect of the government budget cuts.

(Reporting by Rachelle Younglai; Editing by Paul Simao)

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Comments (34)
Harry079 wrote:
Hey maybe it’s just me but I remember Treasuary Secretary Geitner writing letters to the Speaker of the House and the Senate Majority Leader in December 2012 WARNING them that they would hit the debt limit before the end of December 2012.

The debt limit was hit on December 31, 2012. Then Congress temporarily suspended the debt limit until May 17.

Technically today we are nearly $400 billion past the Debt Limit so I have no frickin idea what the heck you at Reuters and your think tank buddies are talking about.

I just looked at the Treasury Site and did not see where the debt limit was raised. It still states the debt limit is $16.394 trillion when we are over $16.7 trillion which it also states right there in plain view.

Apr 26, 2013 6:19pm EDT  --  Report as abuse
Harry079 wrote:
Here’s the treasury website:

http://fms.treas.gov/dts/index.html

Click on text file for April 25.

Look at the bottom of page 6.

Tell me I dreaming!!!!

Apr 26, 2013 6:25pm EDT  --  Report as abuse
Harry079 wrote:
December 26, 2012

The Honorable Harry Reid

Majority Leader

United States Senate

Washington, DC 20510

Dear Mr. Leader:

I am writing to inform you that the statutory debt limit will be reached on December 31, 2012, and to notify you that the Treasury Department will shortly begin taking certain extraordinary measures authorized by law to temporarily postpone the date that the United States would otherwise default on its legal obligations.

These extraordinary measures, which are explained in detail in an appendix​ to this letter, can create approximately $200 billion in headroom under the debt limit. Under normal circumstances, that amount of headroom would last approximately two months. However, given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures. At this time, the extent to which the upcoming tax filing season will be delayed as a result of these unresolved policy questions is also uncertain. If left unresolved, the expiring tax provisions and automatic spending cuts, as well as the attendant delays in filing of tax returns, would have the effect of adding some additional time to the duration of the extraordinary measures. Treasury will provide more guidance regarding the expected duration of these measures when the policy outlook becomes clearer.

Sincerely,

Timothy F. Geithner

Apr 26, 2013 7:22pm EDT  --  Report as abuse
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