“The trend in our projected net resources has continued to be negative," warns Treasury Secretary Lew forcing the administration to move up the deadline for the end of extraordinary measures from Nov 5th to Nov 3rd.
Ironically, Lew explains..
- *LEW: OPERATING WITHOUT BORROWING AUTHORITY IS 'IRRESPONSIBLE'
But operating beyond your means (i.e. borrowing to be able to afford everything) is fine?
As Bloomberg reports,
Treasury Secretary Jacob J. Lew moved up by two days to Nov. 3 the deadline by which Congress must raise the nation’s debt limit.
The Treasury projections of the administration’s net resources have fallen $4 billion to $6 billion short of expectations, forcing the department to move up the date from Nov. 5, Lew said in a letter Thursday to House Speaker John Boehner. After the new deadline, the Treasury will have less than $30 billion to fund the government, “far short” of expenses on certain days, Lew said.
“The trend in our projected net resources has continued to be negative,” Lew said. "I respectfully urge Congress to take action as soon as possible, raise the debt limit without delay, and remove an unnecessary threat to our economy."
The Treasury is using extraordinary measures to stay under the borrowing limit. Government expenditures are as high as $60 billion depending on the day, he said.
* * *
From Lew's letter to Boehner
“Operating the United States government with no borrowing authority, and with only the cash on hand on a given day, would be profoundly irresponsible. As I wrote previously, we anticipate that a remaining cash balance of less than $30 billion would be depleted quickly,”
“We have learned from the past that failing to act until the last minute can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States,”
* * *
As Goldman previously noted,
Q: When will the debt limit be reached?
Probably in November. The Treasury estimates that the “extraordinary measures” it uses to increase borrowing capacity under the debt limit will not be exhausted before late October. As of the end of August, the Treasury appeared to have exhausted most of its bookkeeping strategies, with only about $60bn remaining (mainly the $23bn of the Exchange Stabilization Fund that is invested in Treasuries and $36bn related to the Civil Service Retirement and Disability Fund). However, it also has a substantial cash balance ($146bn as of September 18), which will provide an additional cushion once the Treasury exhausts its borrowing capacity. In the past, the Treasury has based the projected deadline for raising the debt limit that it announces to Congress assuming that the cash balance will not be allowed to go under $50bn, though on occasion it has allowed it to dip to $30bn preceding a debt limit increase.
And shutdowns create volatility mainly when they overlap with a debt limit deadline
Source: Goldman Sachs