WASHINGTON, Nov 29 (Reuters) – President Barack Obama and
his Democrats are insisting that an increase in the $16.4
trillion U.S. debt limit be part of any deal to avert the
“fiscal cliff” of year-end tax hikes and automatic spending
cuts.
At the current federal spending pace, the U.S. Treasury
Department expects to reach the debt limit around the end of
2012. But Congressional Budget Office said on Thursday that
government borrowing can continue through mid-February or early
March by employing extraordinary cash management measures.
As of Wednesday, the federal debt stood at $16.268 billion,
$126 billion below the limit, according to the Treasury.
Following is the non-partisan CBO’s assessment of the
capacity in each of these extraordinary measures, which combined
could claw back about $215 billion in borrowing capacity. CBO
also gave estimates of the key government cash inflow and
outflow dates early in the new year.
TREASURY CASH MANAGEMENT MOVES
— Suspend daily reinvestment of assets in a government
employee pension fund known as the G-fund. These totaled $152
billion as of Oct. 31.
— Suspend dollar investments of the Exchange Stabilization
Fund, which was used in the past to backstop the dollar and
money market mutual funds. This would provide $23 billion in
borrowing capacity.
— Suspend the issuance of new securities to other pension
funds, the Civil Service Retirement and Disability Fund and the
Postal Service Retiree Health Benefits Fund. This would provide
about $19 billion.
— Suspend the issuance of State and Local Government Series
securities to municipal bond issuers and halt the sale of
consumer savings bonds, both of which count against the debt
limit. This would provide up to $13 billion in monthly borrowing
capacity.
— Substitute up to $8 billion in Treasury securities with
debt issued by the Federal Financing Bank, which is not subject
to the debt limit.
KEY INFLOW/OUTFLOW DATES
— MID JANUARY: Receipt of nonwithheld individual income tax
payments. These have averaged about $45 billion in January over
the past few years. The Treasury also will continue to collect
income and payroll taxes withheld from paychecks.
— Mid March: Receipt of quarterly corporate tax payments.
These have averaged about $23 billion over the past few years in
March.
— Feb. 1: Payment of benefits for Social Security, Medicare
Advantage, Medicare Part D and others, along with payroll for
active duty military staff. These recently totaled $67 billion
monthly.
— Feb. 6, 13, 20: Additional Social Security payments,
recently about $11 billion each time.
— Feb. 15: a large interest payment on publicly issued
securities is due. This has previously exceeded $30 billion.
— March 1: another big payment for Social Security,
Medicare benefits and military pay, also around $67 billion.
— March 6, 13, 20: Additional Social Security payments, $11
billion each.
COMPLICATIONS
Chief among these are the uncertainty over future tax rates
amid the rancor on Capitol Hill and potential delays in
processing of tax returns by the Internal Revenue Service.
Possible changes to the Alternative Minimum Tax, resulting
in more upper-middle income taxpayers having to pay the tax,
could delay filings and processing of returns, potentially
affecting the government’s receipts early in the new year. The
future reach of the AMT is one of the key questions that
Congress is wrestling with in the fiscal cliff talks, and the
outcome could cause delays in preparation of IRS tax forms.
“Given the magnitude of the government’s daily cash flows
and uncertainty about the size of certain key transactions over
the next few months, it is difficult to be precise about the
date on which the Treasury will lose its authority to borrow
additional funds,” the CBO said in its report.
(Reporting By David Lawder; Editing by Bob Burgdorfer)
