The Treasury Department Will Run out of Money on Oct. 17

A blog about business and economics.
Sept. 25 2013 10:04 AM

The Treasury Department Will Run out of Money on Oct. 17

Treasury Secretary Jack Lew speaks on the state of the U.S. economy at the Economic Club in Washington, D.C., on Sept. 17, 2013.

Photo by Saul Loeb/AFP/Getty Images

Treasury Secretary Jack Lew wrote to Congress today with an update on the Treasury Department's cash situation—it's going to run out of money on Oct. 17.

Normally that would be no problem. By law, Congress mandates that certain monies be spent on Social Security benefits. Medicare benefits are the same. Soldiers and sailors are legally entitled to pay, as are veterans to their benefits. Military and civilian contractors are entitled to money in exchange for the services they're providing. FBI agents have salaries, federal prisons have utility bills. It's legally mandatory to pay all this stuff. So when the Treasury doesn't have enough money to pay everything it has to pay, it borrows money. And luckily for the Treasury, demand for American federal debt is strong and the interest rate we pay on it is low.

But we've already reached the statutory cap on the amount of money the Treasury is allowed to borrow. So we're headed straight for a legal and constitutional crisis that could also become a financial crisis.


What laws does the executive branch follow and which does it break? What litigation will result from any decision, and who will prevail? I think the conventional wisdom actually somewhat overstates the odds of this leading to a total financial meltdown. Worst comes to worst, you pay people with IOUs for a week and then organize an "illegal" debt auction where bonds will sell at a modest premium to currently prevailing rates and ultimately the courts legitimize the option. But that will definitely be a kind of constitutional meltdown that will permanently shake confidence in the American financial and political system.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Justice Ginsburg’s Crucial Dissent in the Texas Voter ID Case

The Jarring Experience of Watching White Americans Speak Frankly About Race

How Facebook’s New Feature Could Come in Handy During a Disaster

The Most Ingenious Teaching Device Ever Invented

Sprawl, Decadence, and Environmental Ruin in Nevada

View From Chicago

You Should Be Able to Sell Your Kidney

Or at least trade it for something.

Space: The Next Generation

An All-Female Mission to Mars

As a NASA guinea pig, I verified that women would be cheaper to launch than men.

Terrorism, Immigration, and Ebola Are Combining Into a Supercluster of Anxiety

The Legal Loophole That Allows Microsoft to Seize Assets and Shut Down Companies

  News & Politics
Oct. 19 2014 1:05 PM Dawn Patrol Justice Ruth Bader Ginsburg’s critically important 5 a.m. wake-up call on voting rights.
Business Insider
Oct. 19 2014 11:40 AM Pot-Infused Halloween Candy Is a Worry in Colorado
Oct. 17 2014 5:26 PM Judge Begrudgingly Strikes Down Wyoming’s Gay Marriage Ban
  Double X
The XX Factor
Oct. 17 2014 4:23 PM A Former FBI Agent On Why It’s So Hard to Prosecute Gamergate Trolls
  Slate Plus
Tv Club
Oct. 20 2014 7:15 AM The Slate Doctor Who Podcast: Episode 9 A spoiler-filled discussion of "Flatline."
Oct. 19 2014 4:33 PM Building Family Relationships in and out of Juvenile Detention Centers
Future Tense
Oct. 17 2014 6:05 PM There Is No Better Use For Drones Than Star Wars Reenactments
  Health & Science
Bad Astronomy
Oct. 20 2014 7:00 AM Gallery: The Red Planet and the Comet
Sports Nut
Oct. 16 2014 2:03 PM Oh What a Relief It Is How the rise of the bullpen has changed baseball.