As funds run short, Treasury asks agencies if payments can be made later
Senior Biden aides are rummaging through the nation’s books, looking for ways to conserve cash while Washington battles over the debt ceiling
By Jeff Stein, Rachel Siegel and Tony Romm
Updated May 23, 2023 at 5:12 p.m. EDT | Published May 23, 2023 at 9:08 a.m. EDT
The Treasury Department has asked federal agencies whether they can make upcoming payments at a later date, two people familiar with the matter said, as senior Biden officials search for fresh ways to conserve cash and prevent the U.S. government from facing an unprecedented default.
With a deadline looming in less than two weeks, the White House is looking for ways to buy more time for President Biden and House Speaker Kevin McCarthy (R-Calif.) to cut a deal to raise the federal debt ceiling, which sets a legal limit on government borrowing. Without additional borrowing, a fresh burst of tax revenue or new ways to slow spending, the federal government expects to miss a payment for the first time in modern history in early June.
To put off the so-called “X-date” when reserves run dry, Treasury officials have asked their counterparts at federal agencies about the flexibility of payments due before early June, one of the people said. Treasury has not asked federal agencies to postpone payments beyond their due dates, the person said.
The planning has become increasingly urgent in recent days. Last week, senior Treasury staff sent a memo to federal agencies instructing them to take additional steps to keep the Treasury Department closely apprised of their spending. In the memo — which was obtained by The Washington Post and has not been previously reported — David A. Lebryk, fiscal assistant secretary for Treasury, ordered agency officials to notify Treasury at least two days in advance of all “deposits and disbursements” between $50 million and $500 million. Payments above $500 million require five days notice, the memo said.
“Please stress to your staff the importance of these updates during this time and to ensure that your agency’s reports are accurate,” the memo said. “Your reporting offices should be reconciling reported amounts to actual payment activity to ensure the reliability of these reports during the critical period.”
Negotiations to find a broad agreement to raise the debt ceiling continued for several hours between representatives of Biden and McCarthy Tuesday, but little new progress appeared to have been made after Monday night’s meeting between the two leaders, who remain divided over how much the federal government should spend next year and other issues. Walking into the Capitol on Tuesday morning, McCarthy said the two sides remain far apart. Asked whether he was close to a deal, McCarthy responded, “no,” though he said it is still possible to get an agreement completed before June 1. White House spokeswoman Karine Jean-Pierre, meanwhile, told reporters that the talks have “been productive,” adding, “We believe there is a space and an opportunity here to have a bipartisan, reasonable, reasonable budget agreement.”
The Bipartisan Policy Center, a D.C.-based think tank whose debt ceiling estimates are closely watched, reported Tuesday that it expected the U.S. government to run out of money between June 2 and 13 if the limit is not raised.Major stock indexes closed slightly down Tuesday as traders looked ahead to the prospect of default.
Spokespeople for the White House declined to comment on any attempts to conserve funds ahead of the deadline. A spokesperson for Treasury said: “To produce an accurate forecast around the debt limit, it’s critical that Treasury have updated information on the magnitude and timing of agency payments. As in prior debt limit episodes, Treasury will continue to regularly communicate with all aspects of the federal government on their planned expenditures.”
Determining the precise amount of money available to make federal payments has become especially critical as some Biden aides look for ways to buy more time for high-stakes debt ceiling negotiations occurring between the White House and Capitol Hill.
In a letter Monday to lawmakers, Treasury Secretary Janet L. Yellen affirmed that Congress may have only until June 1 before the federal government exhausts its supply of cash, though she again predicted that Treasury may be able to hold out until “early June.” Some Wall Street forecasters have said the true X-date — the day when the government finally misses a payment — is likely June 8 or 9.
With a big influx of quarterly tax payments expected to arrive in Treasury’s coffers on June 15, administration officials are looking for ways to hoard cash and eke out a few more days. If they can make it to June 15, the surge in revenue might give Treasury enough funding to push the X-date into July, when a fresh round of accounting measures would become available, perhaps allowing them to push the prospect of default even further into the future.
“It’s possible they have some tricks up their sleeves to get to June 15,” said Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, a Washington-based think tank. “And if they get to June 15, they can go a lot longer.”
Administration officials are not banking on this strategy. Yellen has been adamant that the only way to avoid calamity is for Congress to raise the debt ceiling before June. Independent budget experts have stressed that no good legal options exist for significantly extending the amount of cash Treasury has on hand.
Meanwhile, some experts fear that extending the deadline could have the unintended consequence of creating more uncertainty among lawmakers, which could take the pressure off their rush to reach an agreement to raise the $31.4 trillion debt ceiling — even as the imperative for congressional action becomes increasingly urgent.
Brian Riedl, a policy analyst at the Manhattan Institute, a libertarian-leaning think tank, said it is unclear if Treasury can find much in available funds rummaging through the nation’s couch cushions.
“Washington is borrowing $100 billion a month, and the odds of finding a significant pile of cash that hadn’t gone noticed is between slim and none,” Riedl said.
If the United States does get to the brink, Biden aides already are exploring unilateral options for staving off what many economists believe would be a global economic crisis. One administration official, speaking on the condition of anonymity to describe internal government deliberations, agreed that “we’re looking under the couch cushions.” But, the person said, “it’s a very large couch.”
Administration officials declined to provide details about the actions under consideration, but outside analysts outlined some likely options.
Alec Phillips, the chief U.S. political economist at Goldman Sachs Research, pointed to “a little belt tightening” as one option, in which the Treasury Department could direct agencies — such as the Defense Department and the Centers for Medicare and Medicaid Services — to slow down their process for submitting payments. That would not be the same as ordering them to cease payments, but it could slow the flow of money from Treasury coffers.
Such actions “don’t solve their problem but could be enough if they were looking for just a little extra room (which is probably all they need in June),” Phillips said in an email.
Treasury also could sell bonds held by some of the government’s massive trust funds, such as the Social Security Trust Fund or the Highway Trust Fund. That could raise tens of billions of dollars immediately, some experts said, and the trust funds could easily be made whole once the standoff ends.
Still, these ideas have their downsides.
The law requires contractors and those owed money by the federal government to be to paid promptly. Otherwise, the government wouldface repayment penalties, which could include an additional 4.6 percent in interest, according to Riedl. Federal agencies also could resist attempts to slow or stop payments, citing a 1974 law that bars the executive branch from substituting its own spending priorities for decisions by Congress.
“I don’t believe that any career official in any agency would risk violating [that law] by purposefully delaying a payment in order to get around the X-date,” said David Vandivier, who served as deputy assistant secretary for budget and tax in the Treasury’s legislative affairs office during the Obama administration and is now executive director of the Psaros Center for Financial Markets and Policy at Georgetown University.
The Treasury Department might find a few additional billions of dollars by tapping the Treasury securities held by the Federal Financing Bank, which helps provide low-cost loans for federal programs, said Shai Akabas, director of economic policy at the Bipartisan Policy Center, a D.C.-based think tank. But that would probably amount to less than a day’s worth of federal payments.
Akabas said other options — such as slowing payments or raiding trust funds — would entail other risks. The Biden administration has resisted calls to end the debt ceiling standoff by invoking the 14th Amendment or minting a $1 trillion coin, actions they view as risky and subject to legal challenge. The current search for ways to prolong the X-date could similarly plunge the administration into uncharted waters.
More dramatic options are available. Biden has the authority to sell U.S. assets such as parklands or federal buildings to raise money, but that would almost certainly spark a political backlash. Dean Baker, an economist at the Center for Economic and Policy Research, has noted that the president could sell off a portion of the Treasury’s $500 billion in gold reserves.
There is no indication that either idea is under consideration, though Treasury Secretary James A. Baker III threatened to sell gold bonds during a similar debt ceiling standoff in the 1980s.
“There are measures they could consider, like effectively instructing agencies to wait until bills are due to make them, which could slow down bill payments. But they would be a really big undertaking. And I’m not sure how much they would even delay the X-date,” Akabas said.
He added: “We’ve been through this exercise dozens of times before. So if there was something readily available, you think we would have heard about it.”
Source: Washington Examiner
Treasury reportedly asks agencies about payment flexibility amid debt ceiling fears
by Zachary Halaschak, Economics Reporter | May 23, 2023 10:30 AM
Biden administration officials are looking for ways to extend the time they have for negotiations with congressional Republicans, and with less than two weeks left until the government risks failing to pay incoming bills, Treasury officials have been asking agencies about the flexibility of payments coming due before early June, according to the Washington Post.
Debt ceiling negotiations struggled at the start of the week. There is a renewed sense of urgency in the talks, as the deadline to act is expected to hit sometime in early June, according to the Treasury Department.
The Treasury Department sent a memo to government agencies last week instructing them to take enhanced steps to keep the Treasury well apprised of their spending, according to the report. In the memo, an official directed agencies to tell Treasury at least two days in advance about all deposits and disbursements between $50 million and $500 million, while agencies should notify Treasury five days in advance for payments even greater than that.
“Please stress to your staff the importance of these updates during this time and to ensure that your agency’s reports are accurate,” the memo read. “Your reporting offices should be reconciling reported amounts to actual payment activity to ensure the reliability of these reports during the critical period.”
The White House declined to comment on the report when contacted by the Washington Examiner.
President Joe Biden and House Speaker Kevin McCarthy (R-CA) have been in talks to come up with a deal to raise the limit. Republicans want spending cuts in exchange for a hike.
Republicans already passed legislation that would raise the debt ceiling over the next year either by $1.5 trillion or until March 31, 2024, whichever comes first. But the plan includes items opposed by Senate Democrats.
If the government defaults, it would be a dire situation for the U.S. and world economy. The White House Council of Economic Advisers said that a protracted default would lead to an economic downturn as bad as the Great Recession, with over 8 million people losing their jobs.
Source: Washington Examiner
Report: Treasury Asking Agencies to Delay Payments
By Charles Kim | Tuesday, 23 May 2023 12:53 PM EDT
https://audio.beyondwords.io/e/6914069
As the debt ceiling impasse between President Joe Biden and GOP members of Congress continues, the U.S. Treasury is asking federal agencies if they can make payments “at a later date” to avoid a possible default in early June.
Sources told the Washington Post that the move is an attempt by the Biden administration and Treasury Secretary Janet Yellen to buy time before the United States runs out of money to pay its obligations for the first time in history.
“Please stress to your staff the importance of these updates during this time and to ensure that your agency’s reports are accurate,” the Post reported of an internal memo it reviewed from Treasury’s Fiscal Assistant Secretary David Lebryk said. “Your reporting offices should be reconciling reported amounts to actual payment activity to ensure the reliability of these reports during the critical period.”
The memo asked the agency to update Treasury on all “deposits and disbursements” between $50 million to $500 million at least two days in advance, and five days before making payments over $500 million, the report said.
Yellen sent another letter Monday to Republican House Speaker Kevin McCarthy reiterating her position that the Treasury’s funds will dry up in early June, possibly by June 1, if the debt limit is not raised allowing the nation to borrow enough to pay its bills.
“With an additional week of information now available, I am writing to note that we estimate that it is highly likely that Treasury will no longer be able to satisfy all of the government’s obligations if Congress has not acted to raise or suspend the debt limit by early June, and potentially as early as June 1,” Yellen wrote Monday. “These estimates are based on currently available data, and federal receipts, outlays, and debt could vary from these estimates. I will continue to update Congress as more information becomes available.”
McCarthy and Biden met Monday to discuss the issue and while both men said the talks were “productive,” no agreement was reached.
Yellen said that the continued impasse could “can cause serious harm to business and consumer confidence, raise short-term borrowing costs for taxpayers, and negatively impact the credit rating of the United States.”
“In fact, we have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” her letter said. “If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”
Source: Newsmax
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Copyright © 2022 Dinar Chronicles
______________________________________________________
If you wish to contact the author of any reader submitted guest post, you can give us an email at UniversalOm432Hz@gmail.com and we’ll forward your request to the author.
______________________________________________________
All articles, videos, and images posted on Dinar Chronicles were submitted by readers and/or handpicked by the site itself for informational and/or entertainment purposes.
Dinar Chronicles is not a registered investment adviser, broker dealer, banker or currency dealer and as such, no information on the website should be construed as investment advice. We do not support, represent or guarantee the completeness, truthfulness, accuracy, or reliability of any content or communications posted on this site. Information posted on this site may or may not be fictitious. We do not intend to and are not providing financial, legal, tax, political or any other advice to readers of this website.
Copyright © 2022 Dinar Chronicles
