Washington: The US Treasury says that starting Thursday it will not have enough cash to pay its bills unless Congress increases the USD 16.7 trillion cap on its power to borrow more money.
Treasury Secretary Jacob Lew says it will have only USD 30 billion on hand, with no more "extraordinary measures" -- wiggle room beneath the debt cap -- while it faces a monthly income shortfall of around USD 60 billion.
The Treasury will not -- or cannot -- say precisely when it expects to default on any obligations. Its revenues are volatile and it pays out makes millions each month, from salaries for government workers and social security checks to retirees, to vendor compensation and interest payments on the debt.
Nor will the Treasury say if and how it might prioritize payments, which are tightly scheduled by computer.
The Bipartisan Policy Center (BPC), a Washington think tank, says a default could take place between October 22 and November 1, though this could be extended by "a couple days" if the government shutdown continues.
Goldman Sachs chief economist Jan Hatzius said missing Thursday`s deadline was "manageable" for at least a few days, but added that by October 25 the Treasury would be down to only USD 10 billion.Here is what happens:October 17
: The Treasury`s cash-on-hand drops to USD 30 billion, from USD 88 billion at the beginning of the month.
It keeps receiving tax and other revenue so it can continue to pay most of its obligations but revenue varies from day to day, making it difficult to pin down when exactly it will run out of cash.October 22
: The independent Congressional Budget Office and the BPC both say this is the first day the government might be unable to pay all of its bills, though no major payments are due on this date.October 23
: The government must issue checks for USD 12 billion in social security benefits, according to the BPC.October 24
: The Treasury needs to roll over around USD 93 billion in debt. Although this won`t have any immediate extra costs, the long-term cost could be higher if the ceiling has not been increased.October 31
: The Treasury has to pay out USD 6 billion in interest on government debt, as well as roll over USD 115 billion in bonds.November 1
: The government has to pay out more than USD 55 billion in Medicare payments, social security benefits; as well as salaries and benefits for members and retirees of the military.
First Published: Wednesday, October 16, 2013, 20:53