By David Rapp
The U.S. government, whose legal authority to borrow money expires on or about Aug. 2, expects to take in $172.4 billion next month — enough to cover little more than half of its bills due then, according to a study for the Bipartisan Policy Center, a research organization.
The U.S. may not have to default on outstanding debts or withhold interest payments for that month; it may be able to cover $29 billion in anticipated interest due on Treasury securities with its cash receipts.
After that, the choices become more difficult. The accompanying chart shows the bills coming due and enables the user to pick which ones to pay with the funds available.
Jay Powell, undersecretary of the Treasury for Finance under President George H.W. Bush, calculated for the policy center that $306.7 billion in bills will come due after Aug. 2. They include Social Security benefits, defense vendor payments and military active duty pay, along with federal pay for every department and agency, in addition to the interest payments.
“The government would be faced with a series of unattractive options and have to prioritize what bills are and are not paid,” he said in a statement last week. Deciding which bills to pay — and which to ignore — may involve many scenarios, Powell said.
Powell’s research also shows that the daily cash-flow outlook would be just as difficult to manage. For example, if the cash shortage begins on Aug. 3, as projected by Treasury, the government may find itself unable to make a $23 billion Social Security payment due to go out that day.
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