— As the fuse burns down on the national debt bomb, the world is bracing for the day the U.S. Treasury runs out of cash to pay its bills. But predicting just when that will happen turns out to be a lot harder that it might appear.
The current debt ceiling was reached in mid-May, but Treasury officials said then that the government could get by without additional borrowing until Aug. 2. The extra time was won through a series of "extraordinary measures" that freed up roughly $232 billion by transferring money from some of the thousands of accounts the department manages. It was the Treasury's equivalent of looking under the couch cushions for stray nickels.
Now as the deadline approaches, some independent analysts have suggested that the Treasury may have a few extra days' worth of money because revenues have been coming in faster than initially anticipated.
"It is always possible, however, that just as inflows have surprised to the upside in the past five days, they will surprise to the downside over the next few," Barclays Capital analysts said in a research note Friday.
Tracking the government's cash flow is not as simple as balancing your checkbook or paying a series of monthly household bills with a fixed weekly paycheck. On any given day, money flows in from hundreds of sources into thousands of different government accounts.
The biggest source of revenue, about 40 percent, comes from individual income taxes. The rest comes from sources such as Social Security taxes, excise taxes, taxes paid to dedicated trust funds, estate and gift taxes and customs duties. The government also earns interest on money the Federal Reserve lends to banks, charges fees for permits, and collects payments made to regulatory agencies and the federal court system.
The money goes into an account at the Fed, which maintains what amounts to the government's checking account. Every day, Uncle Sam writes checks on that account to cover payments spelled out in laws passed by Congress.
The biggest payments go to Medicare and Medicaid, Social Security and the Defense Department, followed by a long list of other government agencies and programs. But while Congress authorizes total spending levels, it says nothing about exactly when the money should be spent.
"Some days you actually have a surplus and then other days you have huge deficits," said Jerome Powell, a budget analyst at the Bipartisan Policy Center, who has analyzed the projected inflow and outflows for the first two weeks in August.
Ordinarily, the Treasury has a comfortable cash cushion to smooth out the swings. But as the government's account balance approaches zero, the day is rapidly approaching when it could bounce a check.
On Tuesday, for example, the Treasury's cash balance stood at $82 billion. That was a "deficit" day: only $4.5 billion came in to cover $6.5 billion in authorized payments. On Monday, the department had a better day: it collected $15.3 billion and only had to pay out $11.2 billion.
As the cash balance winds down, it gets a lot harder to predict just when a "deficit day" will leave the government flat broke. Wednesday is a crucial day, said Powell, with a real question over whether the Treasury will have enough money to make Social Security payments.
With a projected $12 billion coming in that day, the government is obligated to make $32 billion in payments, including $23 billion in Social Security checks, according to Powell's analysis. Next Thursday there is only $4 billion projected to come in, while $26 billion in payments are due.
From there, the government keeps falling behind, with "deficit days" burning through payments due faster than the cash comes in until a projected "surplus day" Aug. 12. By then the Treasury would have fallen behind by $54 billion for the month.
The White House has refuted speculation that the Treasury may be able to get by for a few days past the official deadline. On Tuesday, the Treasury will have run out of cash, White House spokesman Jay Carney told reporters.
Aug. 2 is "not a guess," he said. "It's not a political opinion. It is the judgment of career analysts at the Treasury Department."
Whatever the exact date, if the day comes when the government has to live on the cash coming in each day, Treasury officials — not elected members in Congress — will have to decide which bills to pay. (Because the Treasury is legally obligated to fund the budget, spending won't be cut, only postponed until the revenues are collected.)
Most analysts agree that to avoid a default, interest payments on the national debt will be the Treasury's top priority. But living day-to-day increases the risk of an unexpected cash squeeze that puts even those interest payments in jeopardy.
"When the car is running on fumes, you don't know precisely when it will stop. It could be in the next block or five blocks down the road," said Mark Zandi, chief economist at Moody's Analytics. "The risks of prolonging the debt debate and prompting a downgrade of the country's credit rating are significant."