When will the U.S. run out of money to service government obligations?

The U.S. has reached the limit on government debt, the current cash of the U.S. Treasury is 677 billion, what next?

Since October 2013, the U.S. Congress has been using an innovative method with an "unlimited limit," which is a situation where the Treasury is allowed to consume everything that can be consumed from the market, expanding government debt as much as possible.

The limit has not been set rigidly since 2013, but it creates a window when they can rampage.

During periods when government debt approached the established limit, the U.S. Treasury took "extraordinary measures" to prevent default. These measures included suspending investments in certain government funds and other financial maneuvers to temporarily free up space under the debt limit.

The limit on government debt does not mean problems with servicing government debt – it has been reached many times and passed many times. The main changes are the inability to produce net new borrowings, while changing the structure of government debt is permissible within the capabilities (for example, replacing notes with medium-term debt or vice versa).

The inability to produce net borrowings means that the budget must balance either with a surplus or break even, while a deficit is possible within the depletion of the cash position reserve (currently 677 billion).

If the cash position is liquidated and the budget remains in deficit, the U.S. Treasury has limited maneuvers:

🔘Reduce government spending, compensating for the cash shortfall – the amount of spending is comparable to the volume of tax revenues, bringing the budget balance to a zero deficit.

🔘Suspension of investments in government funds: the government pension fund (G Fund), the Postal Service Retiree Health Benefits Fund, and other government funds.

🔘Suspension of reinvestment in government funds: instead of reinvesting proceeds from the redemption of government securities, the Treasury may use these funds to finance current obligations.

🔘Withdrawal of investments from certain government accounts: The Treasury may temporarily withdraw or suspend investments from certain government accounts.

Usually, manipulations with intra-government debt provide a floating buffer of 200-400 billion dollars, which is then almost immediately transferred to public government debt after the limit is raised, while unrealized obligations of government funds are compensated.

What is the practice of finding the threshold limit for government debt?

Last time, 135 days from January 19 to June 3, 2023 (at that time, a fixed limit of 2.5 trillion from December 14, 2021, was in effect, which was exhausted in January 2023)

• 136 days from July 31 to December 14, 2021

• 154 days from March 1 to August 2, 2019

• 63 days from December 8, 2017, to February 9, 2018

• 177 days from March 15 to September 8, 2017

• 232 days from March 15 to November 2, 2015

• 5 days from February 7 to February 12, 2014.

On average, 150 days, if we do not count the test shot in 2014. Probably, the clowning will last until May 2025.

The new limit is effective from January 1, 2025.

Practice shows that raising the limit happens a few hours or even minutes (in the best Hollywood traditions) before the U.S. Treasury's "default," when they will have to forcefully cut expenses.

Therefore, what is interesting is not the clowning around with the limit (they will raise it, as usual, at the last moment), but when the money will run out.

The first quarter is considered very voracious. In Q1 2024, the deficit was 555 billion and 680 billion in Q1 2023. Considering that they are currently running at full speed, plus the main factor of deficit formation is interest expenses, the planned deficit in Q1 2025 may exceed 700 billion.

The lower limit of operational cash is 200-250 billion to avoid a gap in refinancing government debt and closing obligations for government spending. There is 400 billion in cash left and 300 billion in emergency measures, totaling 700 billion.

By April 2025, they will be fully depleted, but there will be a surplus. From May onwards, it will be quite entertaining, as the Treasury's voracity is extreme, and all safety reserves are exhausted.