As of 11/16, the US was $154B away from hitting the debt limit of $16.394T and had a cash balance of $27B. So…what can we expect in the upcoming month? Looking back at last summer’s battle gives us some clues. Sooner, rather than later I would expect the treasury to move to issue debt to build up cash and push us closer to the debt limit. If it was me…I’d issue $154B in debt tomorrow, effectively hitting the debt limit now, but still having a $175B cash cushion. That way, you force the issue now with a month or two of cash on hand rather than waiting until late December or early January. They probably will not be this blatant….they will (or at least should) gradually accomplish this over the next two or three weeks.
As we get closer and closer to the limit, the government will start to play games with the internal debt….effectively moving it off balance sheet, and exchanging it for public debt. This game gets them a little wiggle room… on 8/2 last year…the day the deal was reached, internal debt skyrocketed $114B…a pretty good guess of the size of the nut they were hiding. Assuming this trickery has already started a few weeks back when they announced “Extraordinary Measures” I will be adjusting my forecast a bit back from the 1/20 guestimate last week. Fortunately, the calendar gives us a hard constraint…in addition to heavy outflows of cash due to refunds….it looks like on 2/15 a rather large interest payment is due…in the $30-35B range if the past two years trend continues. So I’ll put it at 2/14…giving the feds a bit more credit for the level of trickery they have at their disposal. If somehow they make it past that, heavy outflows continue into March before picking up late March and of course into the April 15 Tax Day.
All that said, it does seem more likely at this point that a resolution is reached before things get as hot as they did last year. We’ll find out soon enough!!
The US Daily Deficit for 11/15/2012 was $30.9B on revenues of $12.6B and spending of $43.5B. The primary driver was interest expense totaling $29.9B. Remember… we are using cash accounting here, so we catch these interest payments when the cash goes out the door, unlike accrual accounting, where you would be recognizing the interest expense as it was incurred. Halfway through November, our deficit is running about $9B over last year. Last year, the total deficit was 142B for the full month. Since we are pretty much on track with last year, I’ll stick to that, and add an adjustment of $28B for a wild guess of $170B deficit for November 2012. Most of this adjustment is to account for December SSI payments that will go out 11/30 this year since 12/1 is on a weekend, the rest is just a plug to get me to a round number.