Not Such a Hard Deadline

According to a New York Times report, August 2nd is not really the "hard deadline" that the administration has been arguing will signify the end of the federal government's ability to pay its bills.  For months pressure has been building to raise the debt limit by this date to avoid the catastrophic event of default.  However, as the Times reports it seems that there is at least another week of cash available to pay the government's bills.

It turns out the federal government is sitting on some extra cash.  

Thanks to an inflow of tax payments and maneuvering by the Treasury Department, the government can probably continue to pay all of its bills for several days after Aug. 2, providing potentially critical breathing room for Congress to raise the debt ceiling, according to estimates by several Wall Street banks and a Washington research organization.  

The consensus is that the government will not run short of money until Aug. 10, when it would be unable to cut millions of Social Security checks without borrowing more money. ...The government will exhaust its ability to borrow more money on Aug. 2, which is equivalent to maxing out a credit card. But there still will be cash in the federal wallet.  Some Republicans have expressed skepticism about the Aug. 2 deadline, describing it as an artificial line drawn by the Obama administration for political reasons. Analysts emphasize, however, that the deadline is real; it’s just the date that is inexact.

Obviously this does not obviate the need for some deal to, at least in the short-run, raise the debt ceiling with concomitant cuts in spending and some tax reform.  It does however provide the markets with some much needed time before "crisis" hits.  If these numbers are legitimate, it would be prudent for the White House and congressional leaders to seize upon them to quiet market psychology.  Winning a political battle is not worth sinking the economy.