Washington, D.C.–U.S. Senator Mike
Crapo (R-Idaho), Ranking Member of the Senate Finance Committee, requested
updated information for U.S. Department of Treasury Secretary Yellen regarding
the state of federal finances.
Crapo
notes in the letter that “as we near the
end of the debt-limit suspension, it is useful to have updated information on
the state of the Nation’s finances, including projections regarding cash
balances and extraordinary measures,” and asks Secretary Yellen to respond to
the following questions:
1.
Please
identify if Treasury is still projecting an operating cash balance of
approximately $450 billion on July 31, and also identify the range of possible
cash balances on that date within a 98 percent confidence interval.
2.
Please
identify whether Treasury’s legal interpretation of Sec. 301 of the Bipartisan
Budget Act of 2019 constrains the operating cash balance that Treasury could
use to pay incoming obligations after July 31, absent an increase in the debt
limit.
3.
Please
identify how long Treasury projects so-called extraordinary measures will help
allow Treasury to, if necessary, remain below a reinstated debt limit, and also
identify the range of possible dates on which such measures will be depleted
within a 98 percent level of confidence.
Read
the full letter here or below:
Dear Secretary Yellen:
The Bipartisan Budget Act of 2019
suspended the debt limit through July 31, 2021.
Absent legislation to raise the limit, Treasury will take certain
“extraordinary measures” to finance the federal government, and rely on
available operating cash.
Treasury is responsible for
providing timely and updated information to the American people and Congress
about the state of the Nation’s finances, including projections of near-term
balances as a debt limit approaches.
According to the May 5, 2021
Quarterly Refunding Statement: “Treasury is assuming a cash balance of
approximately $450 billion at the expiration of the debt limit suspension on
July 31 based on expected outflows under its cash management policies and
consistent with its authorities and obligations, including the Bipartisan
Budget Act of 2019.”
That Statement was released during
discussions of the state of Treasury borrowing and debt between Treasury
officials and representatives of large private-sector financial institutions at
the May 5 meeting of the Treasury Borrowing Advisory Committee (TBAC).
If the debt limit is not raised by
July 31, according to the Statement: “Treasury, as it has in the past, may take
certain extraordinary measures to continue to finance the government on a
temporary basis…Treasury is evaluating a range of potential scenarios…”
Projections of Treasury’s July 31
cash balance have likely evolved between May 5 and the present, based on
changes to expected cash inflows and outflows.
Interpretations of how Section 301 of the Bipartisan Budget Act of 2019
(P.L. 116-37) governs operating cash available for use by Treasury after July
31, absent an increase at that time in the debt limit, vary.
Some seem to believe that Section
301 would require that Treasury modulate its cash balance down to what it was
at the beginning of the suspension period, or not use any excess over that
amount to remain under the debt limit after July 31. Others seem to believe that Sec. 301 is
satisfied with whatever cash balance Treasury decides it wishes to hold on July
31, so long as the amount is consistent with normal precautionary balances.
How long extraordinary measures can
be utilized to avoid breach of the debt limit, should the limit not be raised
by August 1, is subject to speculation.
Private forecasters have said that Treasury could utilize extraordinary
measures and available operating cash to remain below the reinstated limit on
August 1, should a limit increase not be enacted by then, into early
November. Others reportedly project that
Treasury could remain below a reinstated limit sometime after October 1.
As we near the end of the debt-limit
suspension, it is useful to have updated information on the state of the
Nation’s finances, including projections regarding cash balances and
extraordinary measures.
Please respond to my questions below
by close of business on Friday, July 9.
The questions are intended to gain information that can be useful for
Congress and the American people looking forward. They are not intended to invite debate on the
usefulness of a statutory debt limit.
1.
Please identify if Treasury is still
projecting an operating cash balance of approximately $450 billion on July 31,
and also identify the range of possible cash balances on that date within a 98
percent confidence interval.
2.
Please identify whether Treasury’s
legal interpretation of Sec. 301 of the Bipartisan Budget Act of 2019
constrains the operating cash balance that Treasury could use to pay incoming
obligations after July 31, absent an increase in the debt limit.
3.
Please identify how long Treasury
projects so-called extraordinary measures will help allow Treasury to, if
necessary, remain below a reinstated debt limit, and also identify the range of
possible dates on which such measures will be depleted within a 98 percent
level of confidence.
Sincerely,
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