The US Treasury is asking for later payments as the debt ceiling deadline approaches
To delay the so-called “X date” when reserves are depleted, Treasury officials have asked their counterparts at federal agencies about the flexibility of payments due before early June, one of the people said. Treasury has not asked federal agencies to delay payments beyond their due dates, the person said.
The planning has become increasingly urgent in recent days. Last week, senior treasury officials sent a memo to federal agencies instructing them to take additional steps to keep the Treasury Department closely informed about their spending. In the memo — which was obtained by The Washington Post and has not previously been reported — Treasury Secretary David A. Lebryk ordered agency officials to notify the Treasury Department at least two days in advance of all “deposits and withdrawals” between $50 million and $500 million dollars. Payments above $500 million require five days’ notice, the memo says.
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“Please emphasize to staff the importance of these updates during this time and to ensure the agency’s reports are accurate,” the memo said. “Your reporting offices should reconcile reported amounts with actual payment activity to ensure the reliability of these reports during the critical period.”
White House spokesmen declined to comment. A Treasury spokesperson said: “In order to produce an accurate forecast around the debt ceiling, it is essential that Treasury has up-to-date information on the scale and timing of the agency’s payments. As in previous episodes of the debt ceiling, the Treasury will continue to communicate regularly with all aspects of the federal government about their planned spending.
Determining the exact amount of money available to make federal payments has become especially critical as some Biden aides look for ways to buy more time for debt ceiling negotiations between the White House and Capitol Hill.
In a letter Monday to lawmakers, Treasury Secretary Janet L. Yellen confirmed that Congress may only have until June 1 before the federal government runs out of cash, though she again predicted that the Treasury Department may be able to hold out until “the beginning of June”. Some Wall Street forecasters have said the true X-date — the day the government finally misses a payment — is likely June 8 or 9.
With a large influx of quarterly tax payments expected to enter the treasury on June 15, administration officials are looking for ways to hoard money and get out a few more days. If they can make it to June 15, the surge in revenue could give the Treasury enough funding to push the X date into July, when a new round of accounting measures will become available, perhaps allowing them to push the prospect of a default even further in the future.
“It’s possible they have some tricks up their sleeves to get to June 15,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a Washington-based think tank. “And if they make it to June 15, they can go much further.”
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Administration officials do not trust this strategy. Yellen has been adamant that the only way to avoid disaster is for Congress to raise the debt ceiling before June. Independent budget experts have stressed that there are no good legal alternatives to expanding the amount of cash that the Treasury has on hand.
Meanwhile, some experts fear that extending the deadline could have the unintended consequence of creating more uncertainty among lawmakers, which could take the pressure off their rush to reach a deal to raise the $31.4 trillion debt ceiling — even if the necessity of congressional acts is increasing. urgent.
Brian Riedl, a policy analyst at the Manhattan Institute, a libertarian think tank, said it’s unclear whether the Treasury Department can find much in available funds rummaging through the nation’s couch cushions.
“Washington borrows $100 billion a month, and the chance of finding a significant pile of cash that hasn’t been noticed is slim to none,” Riedl said.
Walking into the Capitol Tuesday morning, McCarthy said the two sides remain far apart. Asked if he was close to a deal, McCarthy said “no,” though he said it’s still possible to get a deal done before June 1.
As questions fly about the absolute deadline by which the U.S. could cover all its bills, McCarthy said he heeded the Treasury Department’s warning about the looming deadline. After taking questions from reporters, McCarthy walked into his office. His fellow GOP negotiators—Rep. Garret Graves (R-La.) and Patrick McHenry (RN.C.) — followed a few minutes later.
If the U.S. comes to the brink, Biden aides are already exploring unilateral options to avert what many economists believe will be a global economic crisis. An administration official, who spoke on condition of anonymity to describe internal government deliberations, agreed that “we’re looking under the couch cushions.” But, the person said, “it’s a very big couch.”
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Administration officials declined to provide details about the actions under consideration, but outside analysts outlined some likely options.
Alec Phillips, chief U.S. policy economist at Goldman Sachs Research, pointed to “a little bit of belt-tightening” as an option, in which the Treasury Department could order agencies — such as the Defense Department and the Centers for Medicare and Medicaid Services — to slow down. down the process to submit payments. It wouldn’t be the same as asking them to stop paying, but it could slow the flow of money from the treasury.
Such actions “do not solve their problem, but may be enough if they are looking for some extra room (which is likely all they need in June),” Phillips said in an email.
The Treasury can also sell bonds held by some of the government’s massive trust funds, such as the Social Security Trust Fund or the Highway Trust Fund. It could raise tens of billions of dollars immediately, some experts said, and the trust funds could easily be made whole once the conflict is over.
Still, these ideas have their drawbacks.
The law requires contractors and those owed money by the federal government to be paid immediately. Otherwise, the government would face repayment penalties, which could include an additional 4.6 percent in interest, according to Riedl. Federal agencies may also resist efforts to slow or stop payments, citing a 1974 law that prevents the executive branch from replacing congressional decisions with its own spending priorities.
“I don’t think any career official in any agency would risk offending [that law] by purposefully delaying a payment to get around the X date, said David Vandivier, who served as deputy assistant secretary for budget and taxation in the Treasury Department’s Office of Legislative Affairs during the Obama administration and is now executive director of the Psaros Center for Financial Markets and Policy at Georgetown University.
The Treasury Department could find a few more billion dollars by tapping the Treasury securities held by the Federal Financing Bank, which helps provide low-cost loans for federal programs, said Shai Akabas, director of economic policy at the Bipartisan Policy Center, a D.C. -based think tank. But that would likely amount to less than one day’s worth of federal payments.
Akabas said other options — such as lowering payments or raiding funds — would involve other risks. The Biden administration has resisted calls to end the debt ceiling by invoking the 14th Amendment or minting a $1 trillion coin, actions they see as risky and subject to legal challenge. The current search for ways to extend the X-date could similarly throw the administration into uncharted waters.
More dramatic options are available. Biden has the authority to sell US assets such as parkland or federal buildings to raise money, but that would almost certainly trigger a political backlash. Dean Baker, an economist at the Center for Economic and Policy Research, has noted that the president could sell some of the Treasury’s $500 billion gold reserves.
There is no indication that either idea is under consideration, although Treasury Secretary James A. Baker III threatened to sell gold bonds under a similar debt ceiling in the 1980s.
“There are measures they could consider, like effectively instructing agencies to wait for bills to make them, which could slow down bill payments. But they would be a really big undertaking. And I’m not sure how much they would even delayed X-date, Akabas said.
He added: “We’ve been through this exercise dozens of times before. So if there was something readily available, you think we would have heard about it.”