Treasury Cites HTF Bailout As Determining Factor of Next Debt Limit Deadline

Earlier today, Treasury Secretary Janet Yellen acknowledged, in a new letter to Congress, something that ETW has been pointing out since August – that a large bailout of the Highway Trust Fund, like the $118 billion bailout contained in the infrastructure bill that President Biden signed into law yesterday, could increase the federal debt to the edge of the current legal limit.

The letter said:

Yesterday, the President signed the Infrastructure Investment and Jobs Act, which appropriates $118 billion for the Highway Trust Fund. Under 26 U.S.C. § 9601, these funds must be transferred into the Highway Trust Fund within one month after the enactment of the legislation, and the transfer will be completed on December 15. Promptly thereafter, the funds will be invested in nonmarketable Treasury securities subject to the debt limit. While I have a high degree of confidence that Treasury will be able to finance the U.S. government through December 15 and complete the Highway Trust Fund investment, there are scenarios in which Treasury would be left with insufficient remaining resources to continue to finance the operations of the U.S. government beyond this date. As the federal government’s cash flow is subject to unavoidable variability, I will continue to update Congress as more information becomes available.
The last debt ceiling increase (P.L. 117-50), enacted just over a month ago on October 14, increased the debt ceiling by $480 billion, from $28.401 trillion to $28.881 trillion. Treasury, which had been using “extraordinary measures” (a.k.a. bookkeeping sleight-of-hand) to avoid breaching the old limit for weeks, took just 7 business days to come to a level just $25 million below the new limit.
Debt Subject to Limit vs Debt Limit (Million $$)
Debt STL Limit Headroom
EOD Wed Oct 13 28,401,463 28,401,463 0
EOD Thu Oct 14 28,700,855 28,881,463 180,608
EOD Fri Oct 15 28,726,676 28,881,463 154,787
EOD Mon Oct 18 28,793,904 28,881,463 87,559
EOD Tue Oct 19 28,815,119 28,881,463 66,344
EOD Wed Oct 20 28,801,520 28,881,463 79,943
EOD Thu Oct 21 28,853,860 28,881,463 27,603
EOD Fri Oct 22 28,881,438 28,881,463 25

Through extraordinary measures (shown in weekly reporting here), Treasury has kept the total debt subject to limit hovering at that level $25 million below the limit for almost a month, but today’s Treasury letter acknowledges that $118 billion in one day, after two months of extraordinary measures, might be the breaking point.

There are the usual small caveats (spending levels and day-to-day receipts fluctuate unpredictably), but one big caveat – quarterly tax payments for filers who use fiscal years that end on March 31 or June 30 file quarterly taxes on December 15, and those tax receipts, if corporate income was strong, could buy additional weeks of staying below the limit.

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