Treasury Says It Balanced Budget in December—But Borrowed $96B on Dec. 31 to Hit Debt Limit During Fiscal Cliff Negotiations

By Terence P. Jeffrey | January 11, 2013 | 6:37pm EST

Treasury Secretary Tim Geithner and President Barack Obama (AP Photo/Pablo Martinez Monsivais)

( - In its monthly statement for December, released Friday, the U.S. Treasury says the federal government balanced its budget during the month, bringing in roughly $270 billion in revenues while making roughly $270 billion in expenditures.

Yet, the Treasury also says that during December it increased by $63.079 billion the national debt subject to the legal limit set by Congress, thus dramatically bringing the debt to that legal limit on Dec. 31, just as Congress and the White House were involved in final negotiations on a deal to avert the so-called “fiscal cliff”--which would have cancelled all of the lower income tax rates signed into law by President George W. Bush.

As the fiscal cliff negotiations were underway on Dec. 31, the Treasury, according to the Daily Treasury Statement for that day, borrowed an additional $95.953 billion against the statutory limit, thus increasing the debt from $16.298022 trillion at the start of business that morning to $16.393975 trillion at the close of business that day. (The current legal limit on the debt is $16.394 trillion.)

The Treasury did not spend all of the new money it borrowed that day, however. Tax revenues, after all, were actually meeting federal expenditures for the month, balancing the budget for at least the 31 days of December.

Instead, Treasury stashed an additional $33.954 billion into its cash reserve. Thus, it increased the cash it was holding in the bank by the end of that day to $92.720 billion.

In other words, the Treasury not only balanced the budget in December, it closed the month with $92.720 billion in cash on hand.

That $92.720 billion in cash that Treasury finished December with was $43.773 billion more than the cash Treasury had on hand at the beginning of December. At that point, according to the Daily Treasury Statement, Treasury had only $48.947 billion in cash on hand.

Indeed, as recently as Nov. 28, the Treasury had gotten by with only $16.103 billion in cash on hand, according do the Treasury statement for that day.

In fact, according to the Daily Treasury Statement, the $92.720 billion in cash Treasury had in its account on the same day it borrowed $95.953 billion and declared the debt limit had been reached was about $10.5 billion more than the $85.446 billion in cash Treasury held at the beginning of fiscal 2013.

Did Treasury need to imminently spend the extra $33.954 billion it added to it cash account New Year's Eve. No. A week later, at the close of business on Monday, Jan. 7, 2013, according to the Daily Treasury Statement for that day, Treasury still had $63.870 billion cash on hand—having drawn down only $28.85 billon of the extra $33.954 billion it stashed way on debt-limit day.

On Dec. 31, Treasury Secretary Timothy Geithner sent a letter to Senate Majority Leader Harry Reid, and carbon copied to House Speaker John Boehner and other congressional leaders, declaring that Treasury had reached the statutory limit on the federal debt and that he was declaring a “debt issuance suspension period” until Feb. 28. During this “suspension period,” the Treasury will take extraordinary measures, including suspending payments into two federal worker retirement accounts, to avoid increasing the national debt.

On Dec. 26, five days before Geithner sent the debt-limit notification letter, he had sent Congress a letter predicting—accurately, it turned out—that the Treasury would hit the debt limit on Dec. 31 (just as the government would be hitting the so-called fiscal cliff). “I am writing to inform you that the statutory debt limit will be reached on December 31, 2012,” Geithner said in that letter.

The first page of the Monthly Treasury Statement for December includes a bar graph indicating that the government took in $270 billion in receipts in December and paid out $270 billion in outlays. Accordingly, the bar graph shows no deficit at all for the month of December.

Page two of the Monthly Treasury Statement for December, includes a chart detailing the month-by-month receipts and outlays for the past fifteen months. This more precise chart indicates that there was a nominal deficit of just $260 million for December. That is because, according to this official Treasury accounting, the government took in approximately $269.501 billion in receipts for the month, and paid out approximately $269.760 in outlays.

The federal government was driven to this approximate balance for the month of December by the third highest revenues for any month during the Obama presidency. (Not surprisingly, the two months of the Obama presidency that saw higher revenues were both Aprils—including April 2012, which had the highest revenue of any month in the Obama president with $318.807 billion, and April 2011, which had the second highest revenue of any month in the Obama presidency with $289.583 billion.)

The latest Daily Treasury Statement, which is for Jan. 10, 2012, shows that the Treasury ended that day with $42.637 billion in cash—and that the debt subject to the legal limit had held steady for the eleventh straight day at exactly $16.393975 trillion.

After Geithner declared that the debt limit had been reached on Dec. 31, Republican leaders in Congress agreed to a "fiscal cliff" deal that increased taxes. It passed the Senate in the wee hours of Jan. 1 and passed the House later that day. President Obama signed it into law on Jan. 2, 2013.

Republican congressional leaders now have until the end of Geithner's "debt issuance suspension period"--Feb. 28--to negotiate a deal with Obama on increasing the limit on the debt.

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