The Treasury Department announced Wednesday it expects to run out of funds to finance government obligations as early as this summer, noting that cash balances are rapidly dwindling as the agency employs "extraordinary measures" to remain under the $22 trillion debt ceiling.
"Based on currently available information, Treasury expects that extraordinary measures will be exhausted sometime in the second half of 2019," Treasury Deputy Assistant Secretary for Federal Finance Brian Smith said in a statement. "It is critical that Congress act to increase the nation's borrowing authority, and Treasury urges Congress to act promptly on this important matter."
Congress suspended the statutory debt limit through March 1, 2019, as part of budget legislation enacted last year (PL 115-123). But Treasury has been getting by on incoming tax receipts as well as the accounting tricks known as extraordinary measures, which include suspending investments of the retirement savings plans for federal employees. Treasury is also burning through its cash stockpile in order to make ends meet without borrowing more than is absolutely needed.
The Congressional Budget Office has estimated such mechanisms won't last beyond late September or early October.
Earlier this week, Treasury estimated it would have $85 billion in cash on hand at the end of September, which is in line with the CBO's forecast and implies they could make it through this summer without action on the debt limit. But it's still a dangerously low figure because it represents only about one week's worth of federal spending. It's also below the minimum cash balance of $150 billion the agency is comfortable with, Smith said in his statement.
If the debt limit isn't raised in time, Treasury would be forced to rely only on cash on hand and incoming tax receipts to fund day-to-day operations since it would no longer be able to issue debt. It would mean daily decisions on which bills to pay — choices such as whether to disburse interest payments to Treasury bondholders, who get paid on the last day of each month, or active-duty military and veterans' benefits, which are paid on the first day of the next month.
The Trump administration has been pushing for swift action on the debt limit for some time, but there has been a lack of urgency because of forecasts like the CBO's.
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Treasury's new statement, which underscores how cash balances fluctuate and may not actually last as long as current estimates, is partly intended to try to change the political calculus on Capitol Hill. But Democratic leaders don't want to easily give up a bargaining chip in the talks over discretionary spending caps for fiscal 2020, which would drop by 10 percent from the current year without a presidential signature on legislation to change the numbers.
The Trump administration wants to hold the line on those lower numbers, however, though with a massive increase for defense programs outside the regular spending caps. That's a nonstarter for House Democrats, who have already begun marking up fiscal 2020 appropriations bills under notional non-defense figures that are 16 percent higher than the Trump budget request, with about 2 percent less for defense.
This story by CQ Roll Call staff writers first appeared in CQ News.