Treasury: Debt Limit to Be Hit by End of February

Ah the danger of cash method accounting.

(UPDATE 12:40 PM PST)

The House passed the legislation that would raise the debt limit by $1.9 trillion. The vote was extremely close, at 217-212, with all Republicans voting against and more than 30 Democrats joining them.

Remember, the Treasury Department said the new limit of $14.3 trillion would be hit by the end of this month.

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The debt limit, which would be raised by $1.9 trillion to $14.3 trillion, will be hit by the end of February, the Treasury Department says. It is THIS FEBRUARY.

As this blog posted on January 28, the Senate already passed the measure by 60-39 (Scott Brown of Massachusetts was not not seated back then)

Now it's the House's turn to vote today, and the increased debt ceiling will carry them till the end of February. What a joke.

US debt to hit proposed ceiling by end-February: Treasury
(2/3/2010 AFP via Google)

"WASHINGTON — The US debt is on track to hit a congressionally proposed debt ceiling of 14.3 trillion dollars by the end of February, the Treasury said Wednesday, a day ahead of a key vote to raise it to that level.

""Based on current projections, Treasury expects to reach the debt ceiling as early as the end of February. However, the government's cash flows are volatile, making it difficult to forecast a precise date," the Treasury said in a statement.

"The current limit on the public debt of the United States is 12.374 trillion dollars.

"The US debt exceeded 12.349 trillion dollars on Monday, according to Treasury data.

"The US House of Representatives will vote Thursday on whether to raise the US debt limit to a historic 14.3 trillion dollars, allowing the United States to borrow another 1.9 trillion dollars." [The article continues.]

Here's the Treasury Department's "February 2010 Quarterly Refunding Statement" dated February 3, 2010. Aside from the debt limit, there are several interesting things in that statement:

• "Treasury believes that auction sizes are at levels that give us the ability to adequately address a broad range of potential financing needs, while allowing the average maturity of debt to gradually extend. As such, Treasury anticipates that nominal coupon auction sizes will stabilize at current levels. "
• Treasury is considering increased auction of TIPS, including a second reopening of 10-year TIPS. This would result in six 10-year TIPS in a year. In 2009, there were four 10-year TIPS auctions.

The amount of Treasury notes and bonds issued has been stable at $200 billion per month. (See the chart here.)

The Treasury Department keeps two sets of books - one done by cash method, and the other by accrual method like everyone else. It is disingenuous of the policymakers to wring hands and plead that they need additional $1.9 trillion to get by this year, when they should know, by accrual method, that they will have used all that up by the end of February. This February.

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