Lew Letter on Debt Limit in Line with CBO, BPC Projections
The latest Treasury data showing that U.S. government cash-on-hand dropped to $76 billion, roughly half of Treasury’s $150 billion target, and Treasury’s estimate that borrowing authority will not be exhausted until late October, are in line with projections by the Bipartisan Policy Center (BPC).
The cash-on-hand data is being watched closely as it will be the amount, barring action by policymakers, that the Treasury would have to finance the government once borrowing authority is exhausted. That point could be reached anytime in the late October to December timeframe, according to separate estimates by Treasury, the Congressional Budget Office and BPC.
Treasury Secretary Jack Lew sent a letter to Congress this week to notify members that borrowing authority, including extraordinary measures, will not be exhausted until late October at the earliest and will likely last a short period of time thereafter. At that point, absent action by policymakers, Treasury would be left to finance the government solely with cash-on-hand.
BPC continues to project that the X Date would most likely occur in November or December of this year. The Congressional Budget Office similarly projects an X Date between mid-November and early December. Because government cash flows, especially revenues, are volatile, these projections are subject to some uncertainty.
The Treasury letter referred to borrowing authority only and did not make a projection about when cash-on-hand might be exhausted. The X Date is when both borrowing authority and cash-on-hand would be exhausted, at which point incoming revenues would be insufficient to meet all federal government financial obligations in full and on time.
Secretary Lew requested that Congress act as soon as possible to address the statutory debt limit. His letter also noted that Treasury cash-on-hand has fallen below the $150 billion minimum balance target. In April, Treasury changed its cash management practices, with a goal of maintaining a sufficient cash balance to last up to five days without market access. This change was made, based upon the recommendation of the Treasury Borrowing Advisory Committee, in response to market disruptions that occurred after the September 11 terrorist attacks and Hurricane Sandy, as well as in anticipation of potential future threats, such as cyberattacks.
As of September 10, cash-on-hand was just over $76 billion. Secretary Lew projected that this balance would recover to at least $150 billion after quarterly tax payments in mid-September, but that it would decline below that threshold soon after.
BPC will continue to monitor government financial data as it becomes available and update its debt limit projections when warranted.
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