Treasury Admits It Underestimated Debt Needs, Predicts Ceiling Breach In 2012; $600 Billion More Debt In Second Half

Tyler Durden's picture

Back on April 30, when the US Treasury, together with the TBAC chaired by Matt Zames (who as everyone knows is being groomed to take over JPMorgan after Jamie gracefully steps down) sat down put together its latest debt funding needs projection, we openly mocked the numbers when we said "Now obviously we are all for the US needing less debt, however we wonder: did the US discover some magical source of tax revenue: last we checked the companies with $100+ billion in cash were paying virtually zero taxes, and US workers were making less and less courtesy of more and more jobs being converted into temp jobs with lower wages, and less withheld tax as a result." Sure enough, minutes ago the Treasury just admitted what we and our readers knew all along: in its quarterly Treasury refunding appetizer, it noted that during the "September 2012 quarter, Treasury expects to issue $276 billion in net marketable debt, assuming an end-of-September cash balance of $60 billion.  This borrowing estimate is $12 billion higher than announced in April 2012.  The increase is primarily due to lower receipts, higher outlays, redemptions of portfolio holdings by the Federal Reserve System, and higher issuances of State and Local Government securities." In other words: if only it wasn't for that pesky lack of revenue and excess spending our mocking would have been for nothing. Alas, it was spot on, and as a result instead of needing $253 billion in fiscal Q4, the US will need $272 billion (after having a $5 greater financing need in fiscal Q3, calendar Q1 as also expected).

Finally, in calendar Q4, the Treasury expects to get back to its roots, at which point it will need $331 billion in debt, 21% more than in calendar Q3, and 17% more than in calendar Q4 of 2011.

Alas, as the chart below shows, which forecasts US Treasury debt based on the just released numbers, all these numbers will ultimately need to be revised even higher as it is now inevitable that the debt ceiling will be breached in 2012, only not as the Treasury predicts toward the end of December, but well before that.

Some other factoids:

  • Treasury forecasts total debt on September 30, 2012 of $16,132 billion and total debt on December 31, 2012 of $16,448 billion. As a reminder, the debt ceiling is $16,394 billion
  • Total debt incurred by the US in the second half of calendar 2012 is estimated to be $592 billion; total financial needs are expected to $603 billion.
    • Total debt incurred in calendar Q4 is expected to be $316 billion, higher than both Q3 ($276 billion) and Q4 2011 ($310 billion).
  • Total debt incurred by the US in all of calendar 2012 is estimated to be $1.165 trillion
    • Total debt incurred by the US in all of calendar 2011 was $1.051 trillion.
  • In other words, calendar 2012 will see a 10% increase in total debt, while total US GDP is expected to rise by just under 2% for the full year.
  • Assuming the Treasury's numbers are correct, each calendar day in the second half will see the US Treasury issue on average $3.3 billion in debt every day, and $136MM every hour; on a work day basis, this amounts to $4.8 billion in new debt each work day, and $200 million every working hour.
  • Assuming 1% sequential growth in GDP, the US will close 2012 with a debt/GDP ratio of 103.4%.
  • Keep in mind, all these numbers will be revised worse in 3 months when the next refunding statement is released.

One word: "Sustainable"

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flacon's picture

When will this shit ever end? 

veyron's picture

Will we all be dying in 2012?

I am more equal than others's picture

Only those selected for termination.  Your notice will be hand delivered by mob rule. 

LawsofPhysics's picture

Long rope and guillotines then?  Better start organizing your mob now.

Simon Endean's picture

Well, here's hoping we all renew at Carousel!

10mm's picture

Lock in on those high capacity mags,they are starting to move like hot cakes.

lunaticfringe's picture

Except for the death thing which is kind of a drawback, I find this all fantastically bullish!

Rainman's picture

Obama '12 bitchez...they just gotta make it to 11/7 !!

circusoflife's picture

awesome user pic!  The only people who die, are those who want to die....

The Gooch's picture

Yes! and we'll be dying in 2013 too!


Pladizow's picture

"This borrowing estimate is $12 billion higher than announced in April 2012"

Isnt that only 3 days worth of borrowing?

DoChenRollingBearing's picture

Is anybody here surprised?

"It's all George Bush's fault!" -- Barrack Obama

RationalPrepper's picture

Even more surprising - it does look like they'll manage to avoid the breach until after the elections.

JLee2027's picture

Too bad. One would have hoped the Jaws of Hell would have opened to bite their ass well before.

DeadFred's picture

There's still time, keep those fingers crossed.

Papasmurf's picture

Great when a plan comes together.

NotApplicable's picture

The key to your phrase is "look like." I would have been shocked if they didn't find a way to conceal the breach until after the selection.

mikla's picture

Missed by that much

Good quote!

Of course, the Treasury is wrong.  As documented by ZH a year ago, the "run-rate" for debt issuance is 30-40% higher than the projected rate (mentioned in this article), because the "off-balance-sheet" liabilities are being forced back onto the balance sheet as cash-flow payments must be made.

The *real* issue is far higher than what is listed here.  Governments only fall through cash-flow problems, and those are in the middle of the exponential blowout.

LawsofPhysics's picture

Sounds like we need another unfunded war or two.

mikla's picture

Krugman was serious about the Alien Invasion.

Mars Attacks

Offthebeach's picture

We need to have it here.
Keep all the Haliburton contract see ice jobs here. On both sides. This.k of the Krugman approved Keynesian multiplyer effect with all the destruction! Not to mention advertising rights and reality TV show potential!

Michael's picture

It's like magic, I think about a subject like this the night before, something I haven't heard about in a while, and the story magically appears on ZH the very next day. I wonder what makes that work.

DavidC's picture

Ah Michael, it's not like magic, it IS magic!


earleflorida's picture

the amorphous cloud of like minds in surreal slumber awaken always through the 'music of the spheres'

FlyoverCountrySchmuck's picture


You mean MSNBC/The Daily Show, and Will&Grace are not the entire economy???



i_call_you_my_base's picture

Will & Grace? How long have you been off the grid?

JimBowie1958's picture

LOL, yeah, so just shut down the government one day each month for the last three months - problem solved!


AGuy's picture

"so just shut down the government one day each month for the last three months. problem solved!"

More like: "Just keep the gov't open one day each month, forever. Problem Solved!"

cougar_w's picture

In about 12 months. Maybe nine.

You got that long to get your shit together. After this time next year there won't be any getting together any more shit.

mademesmile's picture

You sound like my husband, who wants to add to our small arms pile. I want to add to my jewlery collection. Who knows, maybe we can do both.

HungrySeagull's picture

A diamond encrusted shotgun stock would be a good compromise.

cougar_w's picture

Silver bullets come in handy when confronted with the undead.

mademesmile's picture

Haha, the glint would be enought to blind someone. If I get talked onto getting a concealed carry, my weapon of choice will be a thing to behold.

The Gooch's picture

cougar_w. The eternal optimist.

JLee2027's picture

There's no way to predict when. Could be this week. Or in years.

cougar_w's picture

You are mostly correct.

However, not this week they have enough ammo to handle this week and next. And most likely, not many years because they are seriously running out of ammo.

It's not a crap shoot; they are running out of runway. That's a very different kind of call.

Ookspay's picture

During the US War of Independence General George Washington allowed his troops to pillage the poulation to keep the army supplied. They did however, give worthless IOU's to the hapless citizens. Revolution part deux will be very similar.

TheFourthStooge-ing's picture

cougar_w said:

In about 12 months. Maybe nine.

You got that long to get your shit together. After this time next year there won't be any getting together any more shit.

Black Cat Moan - BBA Live

"Get my shit together..."

TrustWho's picture

...War, rationing, and likely, martial law.

RichardENixon's picture

Will that pre-empt the 3 hour WWE Monday Night Raw broadcast tonight? Sure hope not, I heard they're bringing Gorgeous George back.

LMAOLORI's picture



DHS gears up for civil unrest prior to presidential elections

10mm's picture

Ahhh,thee youngsters will again be getting dragged away by those turtle looking people.I really wish they save all that youthful energy for when it counts.stay home election day,or as "Carlin " would do,jack off.

DosZap's picture

When will this shit ever end? 

When the goal is accomplished that it was intended to produce from Day 1.

HD's picture

"When will this shit ever end?"


 If I went long - the market would implode in mere seconds. As long as I'm losing my shirt the world economy will be safe.


humblepie's picture

HD, you should go long, and the rest of us at ZH will go short. We'll cut you in on our earnings on the market implosion. Deal?