Next Debt Cap Raise Wouldn’t Be Needed Until Mid-2015Richard Rubin
Senate passage of a U.S. debt limit suspension today would delay the need for another increase until mid-2015 because income tax payments will postpone the date when the government exhausts its borrowing authority.
The bill set for a final vote in the Senate today would suspend the debt limit through March 15, 2015. The government would then be able to stave off default for several more months using so-called extraordinary measures. The House passed the measure yesterday, 221-201.
Barring significant economic or fiscal policy changes, a debt ceiling increase wouldn’t be needed for “at least a few months” after the March 15 date, said Shai Akabas, associate director of economic policy at the Bipartisan Policy Center in Washington.
The U.S. came within days of missing scheduled payments in August 2011 and October 2013 as Republicans in Congress insisted on attaching spending cuts to a measure to increase the ceiling. The bill now under consideration contains no conditions.
After March 15, 2015, the Treasury Department can avoid default by using extraordinary measures, such as suspending sales of its state and local government series of non-marketable securities. The government also can use cash that comes in through tax payments.
This year, the debt limit was suspended through Feb. 7 and the extraordinary measures were set to last less than a month, compared with last year, when a suspension lasted almost five months. Treasury Secretary Jacob J. Lew told Congress that lawmakers needed to act by Feb. 27.
That was in part because February coincides with the peak period when the government issues individual tax refunds. By contrast, as the April 15 deadline for tax filing nears, the government collects more money.
In 2013, for example, the government ran a $204 billion deficit in February, a $107 billion deficit in March and a $112 billion surplus in April.
Additional extraordinary measures become available on June 30, so if the April tax payments carry the government to that point, those next steps could push a default further into the future, Akabas said.
“There’s a pretty wide range right now to where it could be,” he said.