WASHINGTON -- The federal government would be unable to pay all its bills and face default as early as Oct. 22 and no later than Nov. 1 if the debt limit is not raised, according to an analysis released Tuesday by the Bipartisan Policy Center.
The think tank, which closely tracks the debt limit issue, updated an earlier estimate that the date for a potential default would be between Oct. 18 and Nov. 5.
Treasury Secretary Jacob J. Lew has warned Congress that the $16.7-trillion debt limit must be raised by Oct. 17 or the federal government would face default because it would be out of its so-called extraordinary measures for juggling the nation’s finances.
At that point, Lew said, the Treasury would have to depend on cash on hand of about $30 billion and incoming revenue to pay bills on any given day.
The new estimate from the Bipartisan Policy Center could give Congress more time to overcome a political stalemate and raise the debt limit before the government defaults.
The center’s analysis was based on major federal government payments scheduled at the end of October and early November. But the report warned that it was difficult to set an exact date when a default might occur because the flow of incoming revenue can be random and vary by several billions of dollars.
“No one can predict with absolute certainty the date and time when Treasury will have exhausted all its extraordinary measures and run out of cash on hand,” the report said. “Therefore, policymakers should not assume that they have until Oct. 22 to make decisions concerning the federal debt ceiling.”
Financial markets are likely to start reacting before the date is reached by demanding higher interest rates on U.S. debt, the analysis said. Already, the cost of insurance on U.S. goverment debt has started rising, the center said.
The federal government faces payments of $12 billion for Social Security benefits on Oct. 23, $3 billion for federal employee salaries on Oct. 28, $2 billion to Medicaid providers on Oct. 30 and $6 billion in interest on public debt on Oct. 31.
But bigger payments loom on Nov. 1. The Treasury must pay at least $58 billion on that date -- $25 billion to Social Security recipients, $18 billion to Medicare providers, $12 billion in military and veterans pay and benefits, and $3 billion to recipients of Supplemental Security Income benefits to disabled people.
The large Nov. 1 payments are the reason Halloween is the real debt limit deadline, said Chris Krueger, a senior policy analyst at financial services firm Guggenheim Partners.
Even if the Treasury managed to continue paying all the federal government’s bills after Oct. 17, it would be “highly unlikely” that could continue into November, he said.
Krueger predicted there was a 40% chance the debt limit would not be raised by Lew’s Oct. 17 deadline.