Treasury Seen Out of Cash as Late as Nov. 2: Debt-Limit Update

(Bloomberg) -- Senate Majority Leader Chuck Schumer plans Wednesday to seek a vote in his chamber whether to take up a measure approved by the House that would suspend the nation’s debt ceiling until December 2022. Republicans promise to block him. 

Schumer’s attempt will mark his third try in nine days, amid a partisan stand-off over how to address the Treasury’s looming deadline for running out of cash. Without legislative action, the department will be forced to default on federal obligations. Treasury Secretary Janet Yellen has said the so-called x-date will be around Oct. 18.

President Joe Biden and congressional Democrats have called on Republicans to stop blocking a vote on addressing the debt ceiling and allow the majority party to pass a bill averting what Yellen has repeatedly warned would be a catastrophic event for the U.S. economy and global financial markets.

GOP lawmakers have called on Democrats to increase the debt limit through reconciliation -- the filibuster-bypassing process Democrats are using for a muli-trillion dollar social-spending bill vehemently opposed by Republicans. Democratic lawmakers say that process is too cumbersome to deal with the issue in time to avert damage to the economy and markets.

Key Stories and Developments:

• The Senate plans on Wednesday to try proceeding with a debt-limit bill
• The options lawmakers and policy makers have to avert default
• See this QuickTake explainer on the debt ceiling

All times are Eastern Daylight:

Debt-Ceiling’s Market Risks ‘Seem Moderate,’ JPM’s Barry Says (9:34 a.m.)

Given that the financial system is flush with cash, current debt-ceiling risks “seem moderate,” JPMorgan strategist Jay Barry said Tuesday during an event at the Brookings Institution. 

“We’re at about a five relative to a 10 in 2011 and 2013 because we haven’t seen it propagate out the yield curve,” Barry said during a panel discussion. -- Alexandra Harris

Estimate Sees Treasury Out of Cash by Nov. 4 Latest (9:12 a.m.)

The Bipartisan Policy Center, a Washington think tank, now projects that the Treasury Department will exhaust its extraordinary measures to avert breaching the debt limit between Oct. 19 and Nov. 2. 

That compares with the Treasury Department’s estimate of around Oct. 18, and a previous BPC calculation of Oct. 15 to Nov. 4.

“Even leading up to October 19, the Treasury Department will find itself with dangerously low cash levels. An unexpected event during that time frame could escalate into a financial crisis,” Shai Akabas, BPC’s director of economic policy, said in a statement Wednesday.

White House Warns of ‘Maelstrom’ in Case of Default (7:45 a.m.)

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White House Council of Economic Advisers Chair Cecilia Rouse warned that a default by the Treasury could quickly evolve into a global financial crisis and a recession.

“If the United States does default, the consequences could escalate rapidly and profoundly. The timeframe of these impacts is unclear, since the United States has never defaulted,” Rouse and fellow members of the CEA wrote a blog post Wednesday. Unlike the aid deployed during the pandemic, limits placed by the debt limit mean “the federal government could only stand back, helpless to address the economic maelstrom,” they wrote.

Among those who could be affected by the disruption to federal payments are the following, the CEA said:

• 50 million people receiving Social Security retirement benefits
• 60 million on Medicare
• 75 million enrolled in Medicaid
• 42 million receiving Supplemental Nutrition Assistance Program money
• 60 million recipients of child tax credits
• 30 million children receiving school lunches

Biden to Meet With CEOs to Highlight Risk of Debt Default (7:28 a.m.)

President Joe Biden will meet Wednesday with financial and corporate leaders at the White House to highlight the potential damage to the U.S. economy from a debt default as lawmakers continue brinkmanship over the debt limit, according to a White House official.

Several chief executive officers are expected to attend including Citigroup Inc (NYSE:C).’s Jane Fraser, Bank of America Corp (NYSE:BAC).’s Brian Moynihan and JPMorgan Chase & Co (NYSE:JPM).’s Jamie Dimon.

Dimon will be among those participating virtually. He’s not planning to weigh in on the specific legislative vehicle that should be used to address the debt limit, according to a person familiar with the matter. -- Jennifer Epstein, Hannah Levitt

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