And now we know. The Treasury will exhaust the extraordinary measures it has employed to keep from hitting the legal borrowing limit by Oct. 17. On that date, the Treasury will have an estimated $30 billion cash on hand to pay the nation’s bills. That is $20 billion less than was estimated just a month ago. Treasury Secretary Jack Lew broke this news in a letter today to Speaker John Boehner.
This means that the Bipartisan Policy Center’s prediction of an “X date” is dead-on. The venerable think tank estimated that the date when Treasury would run out of financial delay tactics and when it would run out of cash-on-hand — the “X date” — would be between Oct. 18 and Nov. 5.
The two-page missive calls a provision in a House bill that would prioritize payments (choose bondholders over retirees) in the event of a debt ceiling breach “ill-advised.” As I wrote last week, and Lew warns today, “Any plan to prioritize some payments over others is simply default by another name.”
Lew reiterates President Obama’s commitment to not use the debt ceiling as a bargaining chip. “The president remains willing to negotiate over the future direction of fiscal policy,” he writes, “but he will not negotiate over whether the United States will pay its bills for past commitments.”
Lew reminds Boehner of the damage the 2011 debt-ceiling nonsense had on the economy. “The drawn-out dispute caused business uncertainty to increase, consumer confidence to drop, and financial markets to fall,” he writes. Don’t believe him? Read this report from the Government Accountability Office.
And Lew states for the record once again that “[e]xtending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has already approved.” If the debt ceiling is not raised in time, “[I]t would be impossible for the United States of America to meet all of its obligations for the first time in our history.”
A BPC report released this month showed that in that range of dates the federal government would come up $106 billion short in paying all of its obligations. As if Oct. 17 weren’t fearsome enough, the folks at BPC point out that Nov. 1 will be one helluva day.
As the chart shows, the Treasury will have to pay nearly $60 billion to Social Security beneficiaries, military personnel, Medicare providers and recipients of Supplemental Security Income benefits. Failure to raise the debt ceiling will make this nightmare scenario a painful reality for not only for those going without checks but also for the nation as a whole.
“The letter makes plain that we are fast approaching the moment where this is no longer a game. Just flirting with the debt ceiling in 2011 stalled the U.S. economy and likely cost Americans several hundred thousand jobs,” Jim Kessler of the centrist think tank Third Way told me. “The activist wing of the Republican Party has an asking price of defunding or delaying Obamacare that no one in the mainstream of either party will accept. What that means is that the entire U.S. economy is being held hostage to an extreme wing of the party with a plan that cannot possibly succeed.”
Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget, had stern words for both Congress and the White House. “The Secretary is absolutely right about all the damage that would come with default and that that option should absolutely not be on the table,” she told me via email. “[B]ut what is disheartening is that the White House and Congressional leaders are not in serious discussions about how to deal with the debt – the problem at the heart of all of this – and lift the debt ceiling at the same time. Instead all sides are continuing this juvenile and dangerous pattern of jumping from one crisis to the next and never solving the root problems.”
Of course, MacGuineas is right. But as Ezra Klein points out today, conditions are nowhere near where they should be for such a deal to be worked out in time. At a minimum, congressional Republicans have to give up the opiate of defunding or delaying Obamacare. And Sen. Ted Cruz’s talkathon shows they are nowhere near ready to do something so sensible.
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