Tick-tock-tick-tock-tick-tock-BOOM!
Okay, not quite.
But we did find this debt ceiling itinerary from Goldman Sachs quite useful. There are more moving parts than a Honda commercial, but it provides a decent description of what happens when (assuming the ‘McConnell plan‘ is passed by the US Senate and then mauled to pieces refined by the House):
July 21: Senate begins consideration of House-passed “Cut, Cap, and Balance Act.” This bill passed the House on July 19 by a nearly party-line 234-190 vote. It would increase the debt limit by $2.4 trillion, impose a balanced budget requirement through constitutional amendment, and cut spending by $5.8 trillion over ten years, in line with the House budget resolution passed earlier this year.
July 23: Senate votes (and likely defeats) “Cut, Cap, and Balance Act.” Given the party line vote in the House, the bill is widely expected to be rejected by the Senate.
July 23: Senate begins consideration of McConnell-Reid debt limit proposal. Senate leaders are likely to call for a vote to end debate on the bill soon after it reaches the floor. This will start the procedural clock ticking.
July 25: Senate votes to move forward with debate on McConnell-Reid debt limit bill. Two days after leaders have moved to end debate, the Senate will vote, with 60 votes needed. If it receives 60 votes, as seems likely, 30 hours of debate would ensue.
July 27: Final Senate vote on McConnell-Reid debt limit bill. Following 30 hours of debate and any other procedural complications, the Senate would pass the debt limit increase. While this could happen as early as July 27, if bogged down in procedural delays it could occur as late as July 29.
July 27-29: House takes up Senate package, and potentially alters it. Under its rules, the House normally requires a bill to be publicly available for three days before voting on it, but might be able to bend the rules given the deadline. If support is lacking for the McConnell-Reid plan, as appears possible, the House may vote on an alternative package that pairs $300-$500bn in spending cuts with a debt limit increase of the same size. If it becomes clear during the Senate debate early next week that the Senate approach will not gain adequate Republican support in the House, House Republican leaders might move preemptively to pass a shorter extension rather than waiting to receive the Senate bill.
August 1-2: 4-week, 13-week, and 26-week bills auctioned. These will be the first auctions that settle after the debt limit deadline, on August 4.
August 2: Treasury exhausts financing options. August 2 is the last day that the Treasury seems likely to be able to make all of its scheduled payments under the current borrowing limit.
August 3: Social security payments. Roughly $23 billion in Social Security payments are scheduled to be made on August 3, as they are made on the first Wednesday of every month. This, along with other spending that might be delayed, could provide political motivation to reach an agreement on at least a short-term extension.
August 3: Treasury quarterly refunding announcement. The Treasury is expected to announce its financing plans, as it does each quarter.
August 9-11: 3-year note, 10-year note, and 30-year bond auctions. These auctions settle the same day as the Treasury coupon payment, on August 15.
August 15: Treasury coupon payment. Treasury must make around $30 billion in payments to holders of securities. The scheduled payments are expected to exceed revenues that day, but in the very unlikely event that the debt limit hasn’t been increased by this point, it is likely that the Treasury would have conserved cash in order to make the payment.
Related link:
Goldman: debt ceiling debacle already hurting economy – FT Alphaville
S&P says 50-50 chance of U.S. downgrade – Reuters