The drop-dead date on debt debate may be later than expected Live

That's when the United States runs short of cash to pay all its bills, a date that will come soon after Aug. 2 if Congress and the Obama administration fail to raise the debt ceiling. The problem is that no one knows exactly when the date will be. Increasingly, a number of experts say it's later than previously thought. The government's failure to meet any obligations would upset financial markets and risk a rating-agency downgrade of U.S. debt. Deputy Treasury Secretary Neal Wolin wrote in a note on Treasury.gov earlier this year that missing any payment is "default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments." Market watchers for weeks predicted the U.S. wouldn't have enough funds to meet all of its payments starting Aug. 3, one day after the Treasury Department's borrowing authority is expected to be exhausted. But recent tax-receipt data indicate the U.S. might have another week, possibly longer, before it hits the wall on its balance sheet. That could give lawmakers more breathing room as they try to hammer out a deal on the budget and an agreement to lift the debt ceiling above its current level of $14.3 trillion. It also could extend what's been a contentious debate in Washington, dragging out a process that threatens to upend capital markets and causing more anxiety on Wall Street and throughout the world. This much is clear: On Aug. 2, Treasury says its ability to raise funds with debt will stop. Then, it will have to rely on cash on hand as well as incoming funds to pay the nation's bills. A crucial test comes Aug. 3, when the government has $32 billion in payments scheduled, including about $23 billion for Social Security. Barclays Capital Research previously estimated that Treasury would have only about $30 billion in cash in its coffers, meaning it would miss $2 billion in payments. Now, Barclays estimates the U.S. will have enough funds to meet all of its obligations until Aug. 10, based on government data showing inflows into Treasury were $14 billion higher in mid-July than the firm had previously assumed. Stone & McCarthy Research Associates estimates Treasury will be able to meet its obligations until Aug. 15, possibly longer. Wrightson ICAP, a research firm, also expects Treasury to have until Aug. 15 before it runs short of cash. The Bipartisan Policy Center (BPC) estimates that the U.S. will run out of cash some time between Aug. 2 and Aug. 10. Jay Powell, author of a widely followed BPC report on the debt limit, says it remains too difficult to project a drop-dead date. "It's easy to be wrong by $20 billion," he says. On Aug. 15, the U.S. has $41 billion in spending commitments, including a $29 billion interest payment on its debt, according to the BPC. The upshot: Even if Congress and the Obama administration fail to raise the debt ceiling by Aug. 2, the U.S. might be able to meet its obligations for at least another week. "We're saying they have more time," says Michael Pond, co-head of U.S. rates strategy at Barclays. "The bills won't go unpaid" immediately after Aug. 2. Events are fluid. If the government fails to act by Aug. 2, the U.S. will face significant risks, even with a larger chunk of cash on hand. Market turmoil could disrupt the bond market, causing interest rates to rise. On Aug. 4, the Treasury will need to refinance about $91 billion in debt. If the market is chaotic, as many experts predict, that could disrupt the rollover. Then there are the ratings agencies. Moody's Investors Service has indicated it doesn't plan to downgrade the U.S. unless it fails to meet a debt payment. Standard & Poor's is more of a wild card. The agency has taken an aggressive stance on the debt debate, pushing for a budget deal that shows the U.S. is taking meaningful action to control deficit spending. It could decide to take action if Aug. 2 comes and goes without a move to boost the debt ceiling. In testimony before Congress in July, Federal Reserve Chairman Ben Bernanke suggested that the U.S. could face a downgrade if it misses any payments — not just those on its debt. For more details click here >>>