During the impasse over the debt ceiling, the Treasury Department has been steadily draining its funds to pay for the nation's obligations.
Treasury had $57.3 Billion in cash as of Thursday according to federal data. As the agency receives revenue and makes payment, the amount fluctuates. However, the balance has decreased from $238.5bn at the beginning of the month when the coffers had been relatively flushed from tax collection in April.
Since the US reached its borrowing limit in January, Treasury is forced to use cash and extraordinary measures until Congress raises the debt ceiling. As of Wednesday, the agency still had around $92 billion in extraordinary measures left. This is down from about $220 billion as of the end of January.
Treasury Secretary Janet Yellen warned the lawmakers repeatedly that her ability avoid default may end as early as June 1. Since the nation's obligations exceed its revenues, it needs to borrow to pay its bills.
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Treasury will have to make a decision on how to pay bills if US defaults.
How we can tell if a US default will be a disaster for the economy
Unknown is the exact date when the US will default on its debts for the first ever time. The amount of tax revenue that comes in during the next few weeks and days will be a major factor. If the tax revenue is lower than expected as it was last month for the 2022 season, Yellen may soon be unable to pay the bills on time and in full.
Ben Harris, former assistant Treasury Secretary for Economic Policy, told me that the secretary might not know until a few days before when the country will default.
Consider a scenario where the balances are just a few hundred million dollars. If Treasury relies on a certain amount to be received on a specific day in order to pay for payments, and it falls several billion dollars short of that, then a default could occur.
Harris noted that Treasury has guidelines on how much cash to keep in the bank. The minimum is $150 billion, or one week's expenses. We are definitely below that level at the moment.
While Yellen and the Congressional Budget Office, as well as multiple other forecasters, predict that the X date will likely occur during the first two week of June, Treasury may have enough money to last through the middle part of the month.
If this is the case, it is likely that the government will not default until the end of the summer. The agency will receive another injection of money from the second quarter estimated taxes, due on June 15th. It will also get $145 billion from an 'extraordinary measures' available at that time.
The talks stall
The White House and House Republican negotiators paused for a while their talks on Friday to resolve the impasse over the debt ceiling. Negotiations resumed in the evening at Capitol Hill.
In the event of a default, global financial and economic turmoil would ensue. Since this has never happened before it is impossible to know the full impact. However, it is likely that federal payments such as food stamps, Social Security benefits and wages for federal employees, military personnel and businesses will be delayed.
Rachel Snyderman is senior associate director for economic policy at Bipartisan Policy Centre.