On Thursday, the US will exhaust its borrowing authority, according to the Treasury Department. With both parties and the White House far apart on any deal to end the government shutdown and increase the debt ceiling, the fiscal stand-off will sail past Thursday’s deadline. Even if all sides agreed to a deal this afternoon, time is running out to move an agreement through Congress ahead of the deadline. The country is likely, at least temporarily, to go past the debt ceiling.
When we hit the debt ceiling, the US government will still have around $30 billion in cash. The government doesn’t immediately go into a possible default, but merely loses the authority to borrow additional funds. The real crunch comes on November 1, when tens of billions in Social Security, Veterans benefits and interest payments are due. This make Halloween the real debt ceiling deadline.
In other words, the government can’t borrow any more money after the 17th, but for a week or two, it really doesn’t need to. It’s similar to a household paying its bills. It may not have a lot of money left over, but it doesn’t really need it until the next monthly round of bills comes due.
This awareness seems to be baked-into the deliberations on Capitol Hill. It also explains why, with just over a day until we hit the debt ceiling, the markets haven’t panicked yet. Treasury Secretary Jack Lew has said the 17th is a firm deadline, but a senior aide on the Hill told Breitbart News that “no one believes a word Lew says.”
This all could have been behind us by now. Last Thursday, House Republicans proposed passing a short-term extension in the debt ceiling, to give room for talks on longer-term budget issues. This would have taken the threat of possible default off the tables, but the proposals was swiftly rejected by President Obama and Senate Democrats. It was they who insisted on linking all the outstanding budget issues to an increase in the debt ceiling.
So, we are going past the debt ceiling deadline. As we approach Halloween, the scare tactics and rhetoric from Obama and Senate Democrats will escalate precipitously. This may be the scariest Halloween ever.