Just when things seemed to be calming down in the Middle East, an old fiscal cancer has shown up: Default on obligations the United States has assumed by borrowing to support a growing federal spending appetite.
Default could occur as early as Oct. 18 if Congress and the administration fail to reach an agreement that would raise the government’s borrowing ceiling. That’s according to a Bipartisan Policy Center (BPC) analysis which suggested that the latest would be Nov. 5. It would mean that the government would fall behind in making payments for Social Security benefits and military pensions. Approximately 32 percent of the bills owed during that period would go unpaid.
Treasury Secretary Jacob Lew’s warning last month lines up with the center’s prediction, indicating that Washington would exhaust its borrowing authority by the middle of October. It would mean that the entire U.S. government would be left with a paltry $50 billion cash on hand.
BPC estimates that, as of Aug. 31, the federal government has $108 billion in extraordinary measures available for use. After the federal government has utilized all of the extraordinary measures, only two sources will remain to continue funding government operations: remaining cash on hand and federal revenues received each day.
It would also mean the United State of America would be in default — bankrupt — something that has never happened.
At present the debt ceiling is $16.7 trillion.
Several key events or large payments in September and October affected the date range, including several interest payments on the debt and approximately $100 billion in quarterly income tax payments due in mid-September. At the end of September, $15 billion in dividends are due to the U.S. Treasury from Fannie Mae and Freddie Mac. Also, on the first day of the new fiscal year — Oct. 1 — the value of military retirement benefits, including pensions and health care, earned during the year by currently serving members of the military must be accrued. This will result in an approximately $75 billion increase in intragovernmental debt, which counts toward the debt limit.
In summary: Congress and the president have 51 days to arrive at an agreement on the nation’s debt before we are in default on $17 trillion.