That new era in Washington, heralded by the budget deal we got last week, where compromise is on the table? It's about to be put to the test: Treasury Secretary Jack Lew says lawmakers will need to raise the debt limit come late February, or the U.S. won't be able to pay its bills.
After we hit the debt limit on Feb. 7, the Treasury Department can keep us solvent for a little while longer using what’re called “extraordinary measures.”
“The ‘X-date’ is when the extraordinary measures run out,” says Steve Bell, with the Bipartisan Policy Center. He pays close attention to that X-date, and how much cash the government has on hand.
If the government is robbing Peter to pay Paul, it would seem the government is living paycheck to paycheck. A better analogy? Maybe it is like the government is living payday loan to payday loan. (Of course, the government gets a much better interest rate than you’d get at a payday lender.)
Now, it is hard to say precisely when the government will come up short. On any given day, it doesn’t know for sure how much money is coming in and how much money is going out. But Bell says if history is any guide, “This is the worst possible time you could have this happen.”
It turns out February is a tough month budget-wise.
“Treasury is going to have a lot of payments going out relative to receipts coming in,” says Alex Gelber, who teaches public policy at the University of California at Berkeley. That is because a lot of Americans file their taxes in February – namely, Americans who know they are going to get refunds.
According to Rudy Penner, a fellow with the Urban Institute, on top of those payments, the government will cut a lot of other checks.
“They make a gargantuan number of payments,” he says.
There are interest payments, Social Security payments. In all, we’re talking about three to five million payments each and every day.