At Current Rate of Federal Borrowing, Government on Track to Hit Legal Limit on National Debt on March 14

By Matt Cover | February 24, 2011 | 3:11 AM EST

Treasury Secretary Timothy Geithner addresses at a press conference at the conclusion of a G20 finance ministers’ meeting in Paris, France on February 19, 2011. (Photo: U.S. Treasury Department

( it continues borrowing at its current rate, the U.S. Treasury Department would hit the legal limit on government debt on March 14, according to figures provided by the department and calculations.

Over the 12 months ending January 31, 2011 the Treasury borrowed a total of $1.8 trillion, or approximately $5 billion per day.

As of January 31, the Treasury had $215,499 billion left in statutory borrowing authority, meaning it can only issue that much more federal debt before it runs into the congressionally-mandated limit of $14.3 trillion.

If the federal government continued to borrow money at the $5-billion-per-day pace it exhibited over the past year, it will hit the congressionally-mandated debt limit on March 14.

This means that if the Treasury does not reduce the amount it is borrowing or take other actions to pay the government's bills--or if Congress does not increase the debt limit within the next 19 days--the federal government will begin defaulting on its obligations.

As it approaches the limit, the Treasury can, however, also draw from the cash account it keeps at the Federal Reserve. This account, which is merely a cash operating account, must maintain a positive balance because it is illegal for the Fed to cover any overdrafts since such activity would constitute an illegal Fed loan to the Treasury.

When the Treasury nears the debt limit, it can begin to draw from this account at the Fed and use the remaining balance to pay the government’s bills for a time. As of February 18, this account at the Fed held a balance of $40.4 billion.

The debt limit is the amount of debt the Treasury is legally allowed to hold outstanding. It is not a restriction on Congress’ ability to appropriate or impose new obligations.

Also, it is not related to future spending cuts or increases, meaning that if the Treasury reaches the debt limit even a massive spending cut by Congress would make no difference, as the Treasury would still need to pay current obligations--for which it would need to issue new debt.

In fact, the Treasury has already begun taking steps to slow its borrowing pace, announcing on February 2 that it would slow debt issuances to certain government trust funds. It also estimated that better-than-expected revenue receipts would extend the date at which it would reach the debt limit to sometime between April 5 and May 31.

Treasury Secretary Timothy Geithner had earlier told lawmakers that the Treasury would reach its limit between March 31 and May 16.

“Treasury now expects to reach the debt limit sometime between April 5, 2011 and May 31, 2011,” it stated in its quarterly financing report. “The modest change in these estimated dates reflects an upward revision to projected receipts and a projected downward revision to debt to be issued to government trust funds.”

The trust funds referred to are the so-called G-Fund, which pays federal retirement benefits, and the Exchange Stabilization Fund, which is intended to provide a stable reserve for currency exchange.