Spending Authority

“Agreement provides spending authority through January 15 – suspends debt limit until February 7, but “real” debt limit deadline will probably be around mid-March. The agreement allows bookkeeping strategies known as “extraordinary measures” to be used once the debt limit is reinstated on February 7. In early 2013, the Treasury had around $200bn in extraordinary measures and we assume they will have about the same in early 2014. In 2012 and 2013, from February 7 it took until March 15 and March 6, respectively, for debt subject to limit to climb by $200bn, so we expect that Congress will need to raise (or suspend) the debt ceiling again by mid-March.

Next meaningful deadline would be January 15, when extension of spending authority would expire and next round of cuts under sequestration take effect. The cut grows incrementally from $85bn in FY2013 to $109bn in FY2014. There is interest in both parties in replacing some cuts under sequestration with savings from other parts of the budget, but there is much less agreement on which other areas of the budget should be tapped for savings in lieu of sequestration.” (Goldman Sachs)


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