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Debt deadline: what happens before the US runs out of cash?

The US has until 2 August to raise its debt ceiling or risk a credit downgrade, or worse, even a default. We look at the timetable of events.

 
Debt deadline: what happens before the US runs out of cash?

The US has until 2 August to raise its debt ceiling or risk a credit downgrade, or worse, even a default. We look at the timetable of events.

Squabbling politicians in Washington have failed to agree plans to cut spending and raise the $14.3 trillion (£8.8 trillion) US debt ceiling, even as the United States staggers towards a possible default after next Tuesday.

We look at the events that will take place before the US stops paying its bills.

Thursday

Later today lawmakers in Congress will vote on a plan by John Boehner, House of Representatives speaker, to extend the Treasury's borrowing authority by a few months – something Barack Obama, US president, has said is unacceptable.

Meanwhile, Harry Reid (below), the top Senate Democrat, is pushing a competing proposal supported by the White House to cut $2.2 trillion from the deficit over 10 years without hiking taxes. Yet this plan faces strong opposition from arch conservative 'Tea Party' Republicans in the House.

The US Treasury will also go to market to auction seven-year treasury notes today as part of its routine financing of the administration. This has taken on extra significance following a lacklustre auction of five-year loan notes on Wednesday. Should investors prove wary of buying treasuries the government could be forced to raise the coupon (interest) it pays to investors.

‘The five-year auction indicated a hesitation by investors to take down paper, and I would expect more of the same in the impending seven-year auction if we have not made any political progress,’ said John Briggs, interest rates strategist at Royal Bank of Scotland.

Friday

The US will publish official data on economic growth in the second quarter, further fanning the debate over whether the world’s largest economy will be able to grow fast enough to pay off its massive debt burden.

According to a Reuters poll, economists expect US gross domestic product to have expanded an annualised 1.8% during the period, down from 1.9% in the first quarter.

The weekend

Should Republicans and Democrats fail to bridge their differences over the debt limit before Saturday, they will attempt to do so over the weekend ahead of 2 August, which President Obama has insisted is the deadline for extending the debt ceiling.

‘I think most people in America had hoped over the last weekend we would have had some sort of progress – but it doesn’t look as though they’ve moved on too far since then,’ said Brian Barry, fixed income analyst at Evolution Securities. ‘This weekend will be key to see how negotiations go.’

Monday

The US is due to auction three- and six-month treasuries on Monday. Given that lawmakers are still expected to reach an agreement to resolve the crisis, Barry said, it is difficult to gauge how much impact a failure to do so would have on the auction.

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15 comments so far. Why not have your say?

Pat

Jul 28, 2011 at 14:41

timely and useful information

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Joss

Jul 28, 2011 at 15:06

Well, well,well................."beware the sleeping giant" ....somebody got it correct 200 years ago.... Power is finally moving towards the East

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Spartacus

Jul 28, 2011 at 20:38

Joss - I remember the "China of the 80's", ie Japan. It was predicted they'd dominate the world economy...

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Ivor Biggun

Jul 29, 2011 at 10:50

The illuminati tightens its grip on the NWO

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Daye Tucker

Jul 31, 2011 at 09:27

Time then to reassess policy towards encouraging domestic economic security to balance against the unsustainable influence of the so called global economy which has been hijacked and driven by corporate America. Is this a window of opportunity?

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Paul 2

Jul 31, 2011 at 09:50

@ Ivor Biggun

Congratulations on that.

Turning to your comment, I confess that I find some TLAs confusing. What is the NWO?

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Maverick

Jul 31, 2011 at 10:18

What's a TLA?

What do you lot do with the time you save not typing out the acronyms in full?

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Suze Jamieson

Jul 31, 2011 at 10:35

NWO is, presumably, New World Order, though I fail to see why Ivor couldn't spell that one out. No idea what a TLA is. Do I care?

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Paul 2

Jul 31, 2011 at 10:51

@ Maverick

TLA is an acronym for Three Letter Acronym.

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shaon mukherjee

Jul 31, 2011 at 10:51

''What do you lot do with the time you save not typing out the acronyms in full?''

lol

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Maverick

Jul 31, 2011 at 11:35

Paul 2 - Yeah but, yeah but, yeah but - look up TLA on Wikipedia and see what else it can mean - a Latin American professional golf tour, for example . . . .

I object to acronyms because their users are lazy and the acronyms cause confusion or incomprehension. And some (local authority workers are the worst!) use them as a separate language to exclude non-participants. or to give outsiders an entirely false illusion of competence, when in fact they just hide an inability to think straight and take decisions.

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Paul 2

Jul 31, 2011 at 11:45

@ Maverick

I think you have made my point. I shall try not to be subtle next time.

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Paul 2

Jul 31, 2011 at 11:46

@ Maverick

I think you have made my point. I shall try not to be subtle next time.

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Hotrod

Jul 31, 2011 at 12:18

Fortunately, I don't consider myself to be suffiently articulate to be a politician, I am certainly not numerate enough to be a banker, and my scholarly achievements fall far short of being a university professor. All I know is that if I managed my personal financial affairs in a similar fashion to way the ruling classes manipulate macro economics, I would have been living on sh*t street long ago.

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Suze Jamieson

Jul 31, 2011 at 18:54

@Paul 2

Aha.

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