Today, for the fourth time in three years, the nation will hit the federal debt limit, launching a mad rush to raise the legal cap on borrowing or risk an unprecedented default. The Treasury Department now will deploy "extraordinary measures" -- effectively, accounting techniques -- to buy time before the government is at risk of running out of cash to meet all of daily obligations. The Treasury says it can't promise to meet all obligations past late February, and as shown in this chart, based on data from Nancy Vanden Houten of Stone & McCarthy Research Associates, the administration definitely won't be able to make it past the first two weeks of March. (See the next chart for why even that isn't assured.)
Every day, the government takes in money from tax receipts and other revenues and spends money on salaries, Social Security checks and other expenses. At the same time, Treasury is constantly refinancing the nation's debt. For this reason, Treasury officials have long pointed out that delays in raising the debt ceiling are dangerous and that a default -- or a bad market reaction -- could happen sooner than expected.