Quest for the “X Date”
“X Date” is the term given to the day that the U.S. federal government will no longer be able to meet its debt obligations because of the debt ceiling limit. Congress must act or default.
The game to forecast when the “X Date” will arrive has begun.
The Bipartisan Policy Center (BPC) today fired the first salvo by predicting the X Date will be reached no later than March 1st and could be as soon as February 15th. That prediction came in the form of a very impressive 47-screen Powerpoint™ slide presentation.
These guys are the pros. They have data up the wazoo backing up a pretty lame wide-ranged forecast. It’s like hitting the broad side of a barn while standing next to it.
I thought it might be fun to try my hand at making a prediction to see how close my novice skills match up against the experts.
I, however, will predict the exact day!!
The Azleader Method
The Azleader Method is a lot less scientific than the BPC’s. It’s based on the simple concept that immediate past performance adjusted for near-term expenditure differences is… wellll… close enough for government work.
First, use the Treasury Department’s daily “Debt to the Penny” report to calculate the recent average daily growth rate of the national debt. It came up a surprising low $2.7 billion/day.
It’s a start. The date range chosen was August 31st, 2012 through December 28th, 2012. December 31st was excluded. That was to prevent the daily rate from being made artificially high by included two quarterly balloon payouts instead of one.
However, we expect the average daily deficit will be much higher in the early part of 2013 than $2.7B/day. It always is. January/February are bad spending months.
We will take Secretary Timothy Geithner at his word that there is $200 billion in the “emergency measures” fund.
Predicting a daily growth rate since January 1st, though, is complicated by several things:
- Nobody but Timmy knows how much of the $200 billion was spent before January 1st
- A bunch of new tax changes started on January 1st
- Worried taxpayers will start filing tax returns sooner
So, like any good physics student worth his salt would do… I’ll swag it!
Account for the swags:
- -$15B of the $200 cushion spent before January 1st
- +$6B 2-month total in new revenues from taxing the rich
- +$20B 2-month total increase in payroll tax collections
- -$2B more in refunds because more nervous taxpayers will file earlier
Except for the -$15 billion swag, the other three swags are based on reasonable CBO estimates and human nature.
200 – 15 = $185B <== Amount left in emergency fund on January 1st
The average amount of debt growth in 2012 and 2011 by March 1st of those years was $213B. (≈3.5B/day). This number also comes from the “Debt to the Penny” report. But this amount has to be adjusted for the tax changes and human behavior.
213 – 6 – 20 + 2 = $189B <=== Amount borrowed by March 1st.
We come up short $4 billion to meet expenses by March 1st.
Therefore, by the Azleader Method, “X Date” will be Wednesday, February 27th.
Remember, you heard it here first, folks! 😉