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U.S. Treasury reiterates August 2 debt limit warning
July 27, 2011 / 6:32 PM / in 6 years

U.S. Treasury reiterates August 2 debt limit warning

WASHINGTON (Reuters) - The Treasury on Wednesday reiterated its warning that it cannot guarantee payment of all the government’s bills after August 2 without an increase in the federal borrowing limit.

Moving to dampen expectations that rising tax collections may buy more time for lawmakers to reach a debt reduction deal, a Treasury spokeswoman said recent tax receipts were in line with the department’s forecasts.

Some Wall Street analysts in recent days had suggested that the Treasury now has enough cash to avoid a default on any payment obligations possibly up until mid-August.

“Tax receipts were as expected for June and July. The fact remains that the U.S. will exhaust borrowing authority on August 2 and after that date there is no way to guarantee we will be able to meet all of the nation’s obligations,” a Treasury spokeswoman said in a statement.

The Treasury has said since May that it would no longer be able to borrow new funds after August 2 if Congress does not act to raise the $14.3 trillion debt limit by then and has urged lawmakers to act quickly. However, it has never specified a date for when the government would actually start to miss payments on its debt or other bills.

Barclays Capital said in a report issued on Friday that as of mid-July, it had assumed that the Treasury would not be able to make $32 billion in payments due on August 3. But stronger receipts since then had boosted the Treasury’s cash balance, potentially allowing it to squeak through to the next big Social Security outlay date on August 10, Barclays said.

Many Republican lawmakers have questioned the Treasury’s estimates of when it faced the risk of imminent default, ignoring the Obama administration’s calls for urgent action.

Reporting by Rachelle Younglai and David Lawder; Editing by James Dalgleish

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