OMD Director Jacob Lew

The New York Stock Exchange dropped today, but by a relatively piddling amount, as the markets still have given no indication that they will yet punish Congress for failing to pass a debt limit deal. NASDAQ even gained a few points. The market may be pricing in the fact that Treasury has more cash on hand than it claims, enough to hold things together past August 2nd, past the Social Security payments on August 3rd and even past the large debt rollover on August 4th.

Once you get out to the next large set of payments, there could be problems. But there’s a great deal of credibility tied up in the imprecise rendering of August 2nd as the drop-dead date. If the Administration actually has the cash to go a bit further, it will confirm the basest suspicions of the conservatives.

That’s why OMB Director Jack Lew was out there today denying that Treasury had the additional headroom.

“Aug. 2 is very real. And, you know, I think if you look at the markets, we’ve never predicted a day when things would change,” Lew said on MSNBC […]

“One thing is clear, if the markets believe that this is not going to get resolved, nobody should feel comfortable that they could live with the consequences of that,” Lew said. “And I think that if you look at what the markets are telling us is they think we’ll get our work done. We’ve always gotten it done before, and they believe we’ll get it done now. If we don’t, then I think one should not be comfortable with what comes next.” […]

“I know there are a lot of people outside trying to count the hour-to-hour and day-to-day cash flows. No one has come to me with any evidence that there is more room than August 2nd,” Lew said.

It’s impossible to know with specificity months and months out, given all the variables, the precise day of running out of cash. The White House could be forgiven for missing the mark by a couple days on either side. But this is tied up with perceived credibility. To a large portion of the conservative base and the caucuses in Congress, the White House has none. And this will only feed that. It will make it more impossible to get to a final resolution.

David Dayen

David Dayen