Policy: Economy

Debt ceiling deadline: What happens after Thursday

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Treasury,Debt Ceiling,PennAve,Joseph Lawler,Economy,Budgets and Deficits,Jack Lew,Government Shutdown

Contrary to widespread perception, Thursday, Oct. 17, is not a hard deadline for raising the debt ceiling. The U.S. will not default on Treasury debt or any other obligations on Thursday.

Instead, it's the day that Treasury Secretary Jack Lew has said he will exhaust his ability to borrow by using "extraordinary measures" to free up space under the debt ceiling. Lew has been using up his options since the public debt hit the $16.7 trillion limit in May.

In other words, Thursday is the last day the Treasury can guarantee that there won't be a default.

Economist Stephen Bronars compared what happens after Thursday to extra time at the end of a soccer match -- there's still time left, but the players don't know how much.

After Thursday, the Treasury will be left with roughly $30 billion in cash on hand and incoming revenue to pay any bills that come due. Everything beyond that point is uncertain. The Treasury must make on average about $10 billion in payments a day, any of which could be problematic if incoming revenues, which average $7 billion a day but can't be easily predicted, come up short.

But those payments are lumpy, meaning that there are a few dates in particular that could be what the Bipartisan Policy Center calls the X-Date — the last day on which the Treasury can pay all of its bills on time and in full, ranging from Oct. 22 at the earliest to Nov. 1 at the latest. Based on reports from the Congressional Budget Office, the Bipartisan Policy Center and Goldman Sachs, these are the key dates:

(Mouse over the timeline to see arrows and move left or right)

Any of those dates could result in the Treasury failing to make a payment on an obligation, whether it's the sovereign debt or a payment to a government program. But because there is widespread doubt about when, precisely, that day would be, a market panic that could destabilize the economy could come at any time after Thursday.

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