If They Don’t Raise The Debt Ceiling – Then What?
Here’s a good article taken from the Phoenix Business Journal which gives a bit of a heads up that possibly it’s getting ready to “hit the fan”.
Interesting to note that all the Treasury Secretary has to work with is 50 billion.
U.S. to hit debt ceiling in mid-October
Aug 26, 2013, 1:57pm MST
by Kent Hoover – Washington Bureau Chief
The Treasury Department says the U.S. government will hit its borrowing limit in mid-October, meaning it can pay its bills with only whatever cash it has on hand.
The Treasury Department says the U.S. government will hit its borrowing limit in mid-October, meaning it can pay its bills with only whatever cash it has on hand.
Start the debt ceiling countdown: The U.S. government will reach the limit of its borrowing ability in mid-October, according to Treasury Secretary Jacob Lew.
Lew delivered this news today in a letter to House Speaker John Boehner. Once the U.S. government hits its debt ceiling, it “would be left to fund the government with only the cash we have on hand on any given day,” Lew writes.
That cash balance is projected to be around $50 billion — “insufficient to cover net expenditures for an extended period of time,” Lew writes.
It’s unclear when the U.S. would exhaust its cash, Lew adds, because that depends on “inherently variable and irregular” factors, including the willingness of investors to roll over Treasury securities.
“If investors should become unwilling to loan the United States money, the United States could face an immediate cash shortfall,” Lew writes. “Indeed, such a scenario could undermine financial markets and result in significant disruptions to our economy.”
While mid-October is the drop-dead deadline for raising the nation’s debt ceiling, Congress should act sooner, Lew writes, in order “to protect America’s good credit” and “remove the threat of default.”
Lew reminded Boehner that increasing the government’s borrowing authority does not increase government spending; “it simply allows the Treasury to pay for expenditures Congress has previously approved.”
“Failure to meet that responsibility would cause irreparable harm to the American economy,” Lew writes.
Lew’s letter increases the pressure on Congress to reach an agreement on raising the debt ceiling after it returns to Washington next week. President Barack Obama insists he won’t negotiate with Congress on this issue, but Republicans are considering using the debt ceiling deadline as leverage for forcing additional spending cuts or even defunding health care reform.