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!!