A very simple timeline for the debt-ceiling crisis

October 8, 2013

There's been a fair bit of confusion about the timeline for the debt-ceiling crisis. The date Oct. 17 gets tossed around a fair bit as a hard deadline. But that's probably not the date when we'll see lots of financial disruptions if Congress fails to lift the debt ceiling.


Tick, tick, tick. (The Washington Post)

The real crises are likely to occur a little later in October or early November. But even that's not certain.

So here's a rough timeline for the whole debt-ceiling fiasco:

May 19: The United States hits the debt ceiling. That's right, the U.S. government actually bumped up against its $16.699 trillion borrowing limit five months ago. Ever since, the Treasury Department has taken a slew of “extraordinary measures” — such as tapping exchange-rate funds — to raise an extra $412 billion without borrowing and to ensure the government has enough cash to meet its obligations, from paying bondholders to sending Social Security checks.

Oct. 17. Extraordinary measures end. Oct. 17 isn't necessarily the doomsday date, as Republicans like Bob Corker and Susan Collins have pointed out. It's just the date that the Treasury Department estimates that all those "extraordinary measures" will run out.

At that point, according to Treasury Secretary Jack Lew, the government will have only around $30 billion cash on hand to meet the country's commitments, plus whatever tax money comes in.

This won't necessarily lead to default right away. But it does put the Treasury Department in a precarious situation. "This amount would be far short of net expenditures on certain days, which can be as high as $60 billion," Lew wrote in his letter to Congress.

Oct. 22 – Nov. 1: At some point here, the government likely won't be able to pay all its bills.

The Bipartisan Policy Center estimates that at some point between Oct. 22 and Nov. 1, the government won't have enough cash on hand and won't reap enough tax money to cover all of its daily payments. So the government's checks will start bouncing.

How catastrophic will that be? It depends what payments the federal government actually misses. A lot depends on when the government runs out of cash and whether the Treasury Department decides to try and prioritize payments at all. Here are the big-ticket items that come due between Oct. 18 and Nov. 1:

If the government misses that Medicaid payment to providers on Oct. 30, that might cause some mild disruption.

If, however, the Treasury Department doesn't have enough money to make interest payments on the debt — such as the $6 billion due on Oct. 30 or the $29 billion due on Nov. 15 — then we could have a full-blown financial crisis. That's a default.

Many financial analysts think the end of October or the beginning of November is when the Treasury Department runs the biggest risk of missing a payment, since so many bills come due. So that's a decent bet for doomsday.

Could doomsday come before Oct. 22? Maybe!

However! There's all sorts of market turmoil that could occur up even before doomsday strikes. For example: The Treasury Department has to roll over about $302 billion worth of securities on Oct. 17, Oct. 24, and Oct. 31. If the debt ceiling isn't raised before then, there's a risk that buyers of government debt could sit out these three Treasury auctions or demand higher interest rates, which would increase the cost of U.S. borrowing.

Furthermore, the Bipartisan Policy Center says that its estimate for the "X-date" — i.e., the day the government starts missing payments — is only an approximation. Doomsday could come unexpectedly early.

"No one can predict with absolute certainty the date and time when Treasury will have exhausted all its extraordinary measures and run out of cash on hand," write Shai Akabas, Brian Collins and Steve Bell. "Therefore, policymakers should not assume that they have until October 22 to make decisions concerning the federal debt ceiling. "

So it's impossible to pinpoint the exact day that Armageddon will start if the debt ceiling isn't lifted. Doom probably won't materialize right on Oct. 17. It will probably start in late October or early November. But there's always room for error.

Related: Absolutely everything you need to know about the debt ceiling.

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Ezra Klein · October 8, 2013