As debt ceiling approaches, it’s income that fluctuates
The United States hit its debt limit — or the debt ceiling — on May 19. Since then, the Treasury Department has been relying on what it calls ‘extraordinary measures’ — accounting gimmicks, really — to ensure the U.S. can pay the bills it’s racked up.
This won’t work forever. Last week, Treasury Secretary Jack Lew said we’ll be back up against that ceiling at some point in mid-October. Predicting that with any more specificity is difficult.
“The biggest piece of unpredictability is revenues, really,” says Loren Adler, research director for the Committee for a Responsible Federal Budget. “Spending, actually, is relatively straightforward.”
While most Americans pay their taxes once a year, some folks pay every quarter. These are taxes on capital gains, for instance.
“It’s generally wealthier people who are making these payments, which is part of what makes it highly unpredictable,” Adler says. “And large sums of money. So, we’re talking about tens of billions of dollars here.”
Those quarterly taxes were due last week, so the Treasury Department is trying to add up what came in.
On the expense side of the ledger, there are plenty of payments the government makes regularly, like a $75 billion payment to military pensions next month.
But according to Michael Linden, the managing director for economic policy at the Center for American Progress, there are expenses the government just can’t anticipate.
“The unexpected is, by definition, unexpected,” he says. “A disaster, a flood, an unforeseen military action.”
For something unexpected to affect the bottom line, it would have to be major and it would have to last a long time. Strikes on Syria, for example, probably wouldn’t affect the calculation, because something like that is baked into the Pentagon budget.
The same thing is true of FEMA’s budget, says Alison Fraser is with the Heritage Foundation.
“Well, you’d have to have something really major and unforeseen, like a Hurricane Katrina kind of thing.”
If there were a disaster of that scale, the government would have to mobilize a lot of resources quickly.
Outside analysts have done their own calculations, and they predict those extraordinary measures won’t work anymore at some point between October 18 and November 5.
According to June O’Neill, who used to head the Congressional Budget Office, the Treasury Department likely has a narrower estimate because it has access to more data.
“They’re not going to announce it to the world, you know, because it has so much political significance,” she says.
With apologies to Samuel Johnson, nothing focuses the mind like a deadline. Of course in this case, no one can say for sure when that deadline is.
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