Treasury Will Run Out Of Cash In Mid-October, CBO Warns

Tyler Durden's picture

With Trump tax reform far on the backburner, as the administration is focused on at least getting Obamacare repeal past the Senate, the CBO reminded that in just 4 months a more material threat is facing the US: according to the latest CBO calculations, the Treasury will "most likely" run out of cash in early to mid-October, unless the most polarized Congress in history raises the debt ceiling.

This is what the CBO just said in its latest report on the "Federal Debt and the Statutory Limit", released moments ago.

If the debt limit is not increased above the amount that was established on March 16, 2017, the Treasury will not be authorized to issue additional debt that increases the amount outstanding. (It will be able to issue additional debt only in the amount of maturing debt or the amounts cleared by taking extraordinary measures.) That restriction would ultimately lead to delays of payments for government programs and activities, a default on the government’s debt obligations, or both. CBO estimates that without an increase in the debt limit, the Treasury, by using all available extraordinary measures, would most likely be able to continue borrowing and have sufficient cash to make its usual payments  until early to mid-October of this year.

In recent weeks, Treasury Secretary Mnuchin has urged Congress to lift the debt limit before its August recess (with others calling to abolish it altogether) although he also conceded that the nation can likely pay its bills if action waited until September, which is all lawmakers needed to know they don't have to rush until the very last minute.

He has also warned that the closer the U.S. gets to breaching the debt ceiling in mid-October, the more likely financial markets are to react unfavorably, although that warning appears to have been negated by his first one. On Thursday following the release of the CBO report, he again urged Congress to take action.

“For the benefit of everybody, the sooner that they do this the better,” he said at a White House briefing, although he once again diluted his case by adding that "we have contingency plans" if Congress doesn’t raise debt ceiling by a certain date, so the market “shouldn’t be concerned.” Which is all the market needed to know to keep rising until some time in early October, when it freaks out again.

Of course, the Treasury breached its debt limit on March 16, when the debt ceiling was reset to $19.8 trillion, however, so far there has been no new borrowing authority to surpass it. Since then the Treasury has been using so-called “extraordinary measures,” to pay bills without technically adding to the debt amount, while draining various Treasury emergency funds. As shown in the Citi chat below, those measures are expected to be exhausted in October, although Citi acknowledged the risk of an earlier date (in September) if monthly deficits worsen, and/or if the Treasury refuses to draw down its cash balance to compliment use of “extraordinary measures.”

As the next chart shows, the Treasury traditionally accumulates larger cash balances ahead of debt ceiling showdowns.It is when the cash balance hits zero and the the Treasury taps all extraordinary measures without the authority to borrow more, that things can spiral out of control.

“That would ultimately lead to delays of payments for government programs and activities, a default on the government’s debt obligations, or both,” the CBO report noted.

The last time the US infamously shut down due to passing its debt ceiling was in August 2011, when S&P downgraded the US, formerly at a AAA rating, for the first time ever prompting a furious response from then-Treasury secretary Tim Geithner. 

As The Hill notes, Republicans are wary of increasing the debt limit without tying it to some set of spending or regulatory reforms, a tactic they pursued under President Barack Obama. Furthermore, Republicans will need Democratic support in the Senate to increase the debt ceiling, but Democrats have demanded that Republicans keep the measure free of “poison pill” riders or other policies.

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Bunghole's picture

And the CBO is a non partisan agency.

Good one

The_Juggernaut's picture

BFD.  Just make more free money. Thanks!


-signed: market speculators

Unreliable Narrator's picture

The Treasury should take its last $200B and buy a bond from the Fed with a -2400% interest rate.  Instant $400B per month income.  Makes as much sense as anything else the Fed and government do.  CTRL+P at its finest.

mike_king's picture

Trump should allow sequestration and lay off most federal employess, never to be rehired. DRAIN THE SWAMP.

kliguy38's picture

LOL........REALLY? I thot it was in April. Now its what?  You know they'll print more shit dollars..........

Hal n back's picture

I too thought they extended and raised the debt ceiling in April, out to 9/30/17  and 21 trillion. CNBC reoprted it as well as others.

So now no extension?

Erek's picture

I always thought that 1s and 0s could go to infinity. Where's the problem?

Implied Violins's picture

We're about to hit 'zero point', and there's nothing on the left OR the right.

Too-Big-to-Bail's picture

I thought 'Debt Limit' was just a myth -- a legend of times long forgotten

LawsofPhysics's picture

Please, "debt doesn't matter"...


Makes you wonder why The Fed opposes debt-free money...

Money and value will be redefined in a massive way...   ...again.

humans have definitely been devolving.

Wulfkind's picture

That's right.  Repeat after me.....R E A L Slow like....

Put your finger on the Control button ( CTRL ) and while holding down that button put your finger on the P button .

When the new window pops up enter the desired amount and then press the ENTER button.

Voila !!!   Mo Money....Mo Money....Mo Money !!

halcyon's picture

A call will be made: "Yellen, PRINT MOAR."

Problem solved.

It'll be a debt-ceiling fake-news time again, and it will pass again, without fanfare, and with more printing.


ZoroAustrian's picture

If there's one thing guaranteed to unite congress, no matter how 'partisan', it's raising the debt ceiling.

We Are The Priests's picture

"Treasury will connect 1,000,000 printers in series and lay a fat finger on Ctrl-P in September, CBO confesses"

There.  Fixed it for you.

Hongcha's picture

"Run out of cash"

AH hahahahahhahahahahaha ... excuse me [wiping tears of laughter].

Zorba's idea's picture

Didn't that just happen in ILLinois, Puerto Rico, California and many more to come. All aboard the Debt destination Lloyds house in the Hamptons. 

GlassHouse101's picture

Let's seeeee, war with Iran, war with N.Korea, or war with Russia . . . who cares, so long it's EXPENSIVE!

montresor's picture

Anything that requires the agreement of Congress.. Won't ever happen..

Bill of Rights's picture

Of course they will the Bankers pillaged the treasury.

Eagle40's picture

Isn't the U.S. Treasury managing the ESF. Hummmmmm..Will they be able to buy and inflate stawks? Very interesting. I guess we will see more printing. 

Duc888's picture



IRS has been taking in a record amount of taxes quarter after quarter.  Anyone see a problem here?


GunnerySgtHartman's picture

Yeah.  The government spends way too much money

justin423's picture

These lunatics could t run a one child day care.
Default for the 2nd time in our history.
Though this could have been settled with a one line bill.
Mnuchin should default while Congress is on recess
That will get their attention.

Vinividivinci's picture

Another dark-grey swan turning blacker-er by the day.

Wrenching Away's picture

If there's one thing the Dems and Repubs will be able to agree on, its borrowing more money. C'mon, they aren't going to risk losing a paycheck.

wally_12's picture

cryptocurrencies soaring in October!

Dead Indiana Sky's picture

Why is this still a topic of discussion?  It's NOT different this time, just like everything else.

GunnerySgtHartman's picture

Why is this still a topic of discussion?

Scare tactics.  Before long, we'll hear that without a debt limit increase, Granny will be forced to choose between medicine and dog food and Junior will have to go to school without a government-funded breakfast or lunch.

We Are The Priests's picture

Why should Treasury care if they run out of that which they wish to ban?  Let's turn to Larry Summers for some insight on this thought provoking question.

Hubbs's picture

Debt ceiling?


No one even talks about the debt ceiling anymore, much less ever paying back our national  debt.


I doubt the debt ceiling debate even occurs. When the "deadline" arrives Congress will simply extend the debt ceiling to "whatever it takes" and  the MSM won't even cover the story.

mailll's picture

No wonder the national debt has remained steady at 19.85 trillion for most of the year.  Question:  When the US treasury starts selling treasuries again, won't the yields sky rocket in order to entice more people to buy?  Or will the international bankers just up their balance sheets and easily purchase them so yields don't sky rocket (Like they are probably doing with the stock market)?

Sudden Debt's picture

Is there anybody who wants to take a bet that there won't be a debt increase?


By 2020, American debt will be at 26 to 28 trillion!!!

And that's why it's very well possible that by 2020, the DOW will be at 30.000

bluskyes's picture

A debt ceiling is the best tool available to drain the swamp.

When the host dies, so does the parasite.

Herdee's picture

Looks like David Stockman is batting a pretty high percentage.

JailBanksters's picture

No it won't

Like the head of Feral Reserve Corporation said once

The United States can pay any debt it has because we can always print more.

What ever shenanigans goes on in Congress, the outcome will always be, Print more Money.

The only real argument is, How much do we Print. Two Trillion or Four Trillion.

Ink Pusher's picture

Reality Check:


"The lawsuit now pinpoints the identities of the key racketeering partners of the "Banksters" located in the highest offices of government and acting for their own self-interests."