Saturday, June 17, 2017

The Mother of All Debt Ceiling Crises is Coming

 The Treasury’s cash balance yesterday [June 11] stood at only $153 billion — down by $130 billion just since the tax season peak was reached on April 25th.  Uncle Sam has been burning cash at a rate of $3.2 billion per calendar day since then and has no more room to borrow. That’s because the public debt ceiling is frozen at its March 15th level ($19.808 trillion) and the mavens at the Treasury Building have run out of borrowing gimmicks. It will be impossible to pay Uncle Sam’s bills in full after Labor Day unless the debt ceiling is raised well the $20 trillion mark.
The "drop-dead" date appears to be Labor Day, which is on September 4 and a holiday.  So on September 5 we will be in for a world of hurt unless something big changes.  (The date could be even earlier - $153B divided by $3.2B is 47.8 days.  June 11 + 48 days is July 29).

The Democrats aren't going to support a clean debt ceiling increase because they want Trump to fail.  The Liberty/Freedom caucus wants to see more cuts.  So it is up to the moderate Republicans, the same group that couldn't pass TrumpCare.  Everyone just assumes that a deal will happen at the last minute.  But Stockman doesn't think so:  "And unlike the saves which were put together at the 11th hour in August 2011 and October 2015 by President Obama and Speaker Boehner, this time there will be absolute legislative paralysis."

And even if the debt ceiling gets raised, the government is only funded through the end of September.  So the two issues will get merged, which makes this an all-or-nothing event, without much room for compromise.  The other thing that makes this different from prior fights is that the left is totally crazy, unlike the right.  There is no equivalent of Boehner on the left who can pull them together.

So look for a mini-default on September 5.

Update:  Now we have until October. See

So the issue will definitely conflate with the budget issue.  Look for a shutdown on Monday, October 2.

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