August 2: The absolute deadline for raising the debt ceiling — the date around which all deficit talks have been based — the end of days. Or perhaps not.
Rumors emerged Tuesday evening that a significant extension of the deadline on raising the debt-ceiling was to be announced, shifting the date from Aug. 2. to later that month.
“I have simply heard that they may be announcing that they can expand this to a later time in August. As I said that wouldn’t be surprising to me,” Senate Minority Whip Jon Kyl (R-Ariz.) — and member of the stalled Biden budget talks — told The Hill. Indeed, and extension would give more time for the deficit talks to be resumed and resolved.
Politico emphasizes Wednesday (based on comments from Treasury spokesperson Colleen Murray), that the deadline extension will at most be only a few days later than initially expected.
What is more certain is that in early July, the Treasury will issue a revised estimate of when the exact deadline will be. The Aug. 2. deadline was tied to a a $23 billion Social Security payment due on August 3., but is likely to be marginally extended.
New analysis from the Bipartisan Policy Center suggests that even a few days’ deadline extension could be chaotic. The government would not have enough revenue to pay the full $23 billion payment to Social Security recipients due on Aug. 3, and in the following days the deficit would continue to balloon.
Failure to raise the debt ceiling in August, they predict (based on figures from 2009 and 2010) would lead to a 44 percent cut in federal spending.
Although the $14.3 trillion debt ceiling was actually hit in May, Treasury Secretary Timothy Geithner said the federal government could perform some accounting maneuvers to avoid going into default until Aug. 2.
According to Tuesday’s statement from the Treasury’s spokesperson, revenues will determine the deadline this time round — hence the likelihood that any extension will be just a few days. The Treasury has fewer maneuvers up its sleeve.