Goldman Sachs On The Debt Limit

Goldman Sachs note that U.S. Treasury Secretary Yellen's "new letter to Congress on the debt limit states that "there are scenarios in which Treasury would be left with insufficient remaining resources to continue to finance the operations of the U.S. government beyond (December 15)." This is a softer formulation than she used in her Sep. 28 letter ahead of the last debt limit deadline, when she wrote "we now estimate that Treasury is likely to exhaust its extraordinary measures...by October 18.""

• "That said, the estimate itself looks reasonable. As of Nov. 10, the Treasury had $405bn of cash and extraordinary measures remaining under the debt limit. From that date through year-end in 2018, 2019, and 2020 debt subject to limit has increased by an average of $330bn ($220bn excluding 2020). The complicating factor is the $118bn that the Treasury must transfer to the highway trust fund within 30 days of enactment of the infrastructure bill that the President signed yesterday (Nov. 15). Sec. Yellen indicates that the transfer will happen Dec. 15. If so, it seems likely that the Treasury will exhaust its resources before the end of December."
• "This is the same time we expect the Senate to pass the Build Back Better legislation although that, too, is subject to considerable uncertainty. Republicans have pressed Democratic leaders to pass a debt limit increase via the reconciliation process, and since Congress would already be considering reconciliation legislation around the same time, pairing the issues might become more likely in light of the Treasury's estimate (this would require some additional procedural groundwork before it happens, however). While pairing the issues could have some political downside, the potential benefit might be to set a hard deadline for passage of the BBB legislation just before Congress adjourns for Christmas."