The federal government said Monday it would pay down a small portion of the national debt this quarter for the first time in six years.
The debt reduction, seen as temporary, is a sign that higher tax receipts and spending cuts are improving Washington's finances. The respite in borrowing will likely give the Obama administration a bit more time before running up against the federal debt ceiling.
The Treasury Department said that it expects to retire a net $35 billion in bonds, notes and bills from April to the end of June. That compares with its estimate from earlier this year that it would rack up an additional $103 billion in marketable debt in the second quarter.
The drawdown comes in a season that traditionally sees relatively strong government receipts coming from April tax payments. But in the same quarter a year earlier, the Treasury Department boosted net debt outstanding by $172 billion.
The revenue boost this year came from higher tax rates for wealthier households and higher payroll taxes, as well as the impact of wage increases and delays in paying individual income-tax refunds.
Still, the usual shortfalls will likely return quickly. The Treasury said it expects to borrow a net $223 billion in the July-to-September period. And the budget deficit will likely hit $845 billion in the fiscal year ending Sept. 30, down from more than $1 trillion the prior four years, according to the Congressional Budget Office. U.S. debt stood at $16.718 trillion Friday.
Lawmakers in January approved a short-term suspension of the debt ceiling, allowing the government to keep paying its bills while the White House and Congress negotiate new spending and tax plans. The measure passed by Congress suspended the debt cap until May 18, when it will re-emerge at the level of debt on that day.
If that date comes without an agreement being reached, the Treasury would deploy so-called extraordinary measures, juggling accounts to keep debt below that level while continuing to pay its bills.
Government-controlled mortgage-finance company Fannie Mae could also pay as much as $61.5 billion to the U.S. Treasury as a part of its rescue, a move that would buy the government even more time. Mr. Crandall estimates that a special dividend payment from Fannie Mae would give the Treasury headroom into October.
The Treasury earlier this year warned that its extraordinary measures would give only 2 1/2 to three months of breathing space.
Sheila McKinney
