1

After the debt ceiling showdown of October 2013, the US debt ceiling (basically the total amount of outstanding debt the US is allowed to have at a time) was suspended from October 16, 2013 until February 7, 2014. My question is, has there been any economic forecasts as to when exactly will we hit the debt ceiling again (after taking into account emergency measures by the Treasury)?

To give a point of comparison, the debt limit was previously suspended from February 4, 2013 until May 18, 2013, and that resulted in the US being slated to hit the debt ceiling, after extraordinary measures are exhausted, on October 17, 2013. So would we hit it some time in the summer of 2014 this time?

2

We are going to hit it when it if it is reinstated on February 7th. We already hit the debt ceiling of $16.7 trillion in in may, at which point the Treasury used "extraordinary measures" to avoid a default. Congress reached a deal hours before the default, but this deal only suspended the debt ceiling, it did not raise it except to account for borrowing during the suspension period. This means that we will be at the debt ceiling (at least $17.1 trillion) once it is reinstated.

If the debt ceiling is reinstated and not raised, the Treasury expects that its extraordinary measures will be exhausted within a few weeks. From the Secretary of the Treasury:

We currently estimate that through the use of these measures, we would be able to extend the nation's borrowing authority only until late February or early March 2014.

Even if the Treasury manages to make it until April, where the government benefits from a surplus due to an influx in taxes, the Congressional Budget Office estimates that the Treasury would still exhaust its extraordinary measures in a month or two:

Given the volume of the government’s daily cash flows and the uncertainty about the magnitude of key transactions during those months, the Treasury could exhaust its extraordinary measures and authority to borrow as early as March or as late as May or June.

  • First of all, when the debt ceiling resumes on February 7, 2014, it will no longer be 16.7 trillion; it will auto-adjust to take into account the borrowing done in the suspension period (although we will presumably still officially hit that higher number on February 7). – Keshav Srinivasan Jan 5 '14 at 14:53
  • Second of all, the letter from Geithner you quote is from January 2013, not January 2014, and is about a previous debt ceiling episode. That episode started when we officially hit the debt ceiling on December 31, 2012, and before extraordinary measures were exhausted Congress enacted a suspension from February 4, 2013 to May 17, 2013. – Keshav Srinivasan Jan 5 '14 at 14:55
  • Oh, so it is. He issued a similar quote more recently. I'll find that one. – Avi Jan 5 '14 at 14:58
  • I found the new letter. It's from the new Treasury secretary, Jack Lew: www.treasury.gov/initiatives/Documents/12-19-2013%20Debt%20Limit%20Letter%20FINAL%20Boehner.pdf It says the extraordinary measures would be exhausted between late February and early March. – Keshav Srinivasan Jan 5 '14 at 15:03
  • Thanks! I found a news source covering Jack Lew's statement, but as that's a primary source, I think I'd prefer to use that. The necessary corrections and updates have been implemented. – Avi Jan 5 '14 at 15:03

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