The Treasury department made a sobering announcement yesterday. The U.S. is going to run out of money by mid-October unless Congress raises the government's debt ceiling. Well, not exactly run out, but our cash on hand will drop to $50 billion -- not enough to last us to Halloween.
Before Monday, the Treasury thought we had enough cash to last until Labor Day. Even those of us who are not great with our personal finances have a pretty good idea how long our savings will last us. But it's a little more complicated with the federal government.
When the government does hit the debt limit, whenever that is, the government won't be able to borrow money, which means we have to pay all our bills from our bank account. "The federal government primarily banks at the Fed and then a small amount of money in private bank accounts," says Donald Marron with the Urban Institute.
Now, lots of the bills the government pays from that account are the same amount every month -- paychecks to government employees and Social Security payments. "Then there are other things where there's just uncertainty," Marron says. "We don't know how many people are going to go see their Medicare doctor and what services they are going to get."
There are also unexpected payments to government contractors. We might decide to buy a bunch of cruise missiles to deploy in Syria, for example. And then on the revenue side, there are unexpected payments to the government, like the $60 billion in bailout money that Fannie Mae recently paid back and, the $20 billion from Freddie Mac, "which were not in the baseline forecasts," says Steve Bell, former staff director of the Senate Budget Committee.
Bell says there is so much uncertainty in the budget that the debt can go up or down by billions of dollars on a daily basis. "So there are some days when you have $3 billion more that day that came in when you expected and some day when you have $3 billion less."
And then there is just the sheer scale of the accounting. The U.S. treasury process 10 million transactions every day. That's 10 million factors that affect the Treasury Department's prediction as to when we hit the debt ceiling.
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