As you know, the Continuing Appropriations Act, 2014 suspended the statutory debt limit through February 7, 2014. When that suspension period ends, the United States will again reach the debt limit. The best course of action would be for Congress to act before February 7 to ensure orderly financing of the government. In the absence of Congressional action, Treasury would be forced to use extraordinary measures to continue to finance the government on a temporary basis.
When I previously wrote to you in December, I estimated that Treasury would exhaust extraordinary measures in late February or early March. Based on our best and most recent information, we believe that Treasury is more likely to exhaust those measures in late February. While this forecast is subject to inherent variability, we do not foresee any reasonable scenario in which the extraordinary measures would last for an extended period of time.
It will be interesting to see if Republicans have finally learned their lesson and will just quietly raise the debt limit or if they again try to play games for weeks by making demands that will eventually go unmet.
It should be clear by now that the first debt limit showdown was mainly the fault of President Obama cleverly trying to create some false emergency to force all sides to embrace his grand bargain. The Republicans don’t actually have any leverage with the debt limit as long as Obama holds firm, and Obama seems to have realized what an idiotic mistake he made previously.