It’s growing more likely that the US could default on its debt as soon as early June if Congress doesn’t act, according to a trio of new analyses.
That’s because tax receipts are running much weaker than expected so far this season. The Treasury Department is counting on that infusion of funds, along with several “extraordinary measures,” to continue paying the federal government’s bills in full and on time until lawmakers raise or suspend the debt ceiling.
An accelerated timetable would mean that President Joe Biden and House Republican lawmakers would have to quickly ramp up their debt ceiling discussions in order to avoid a default that would send the US economy and global financial markets into a tailspin. House Speaker Kevin McCarthy is trying to get his legislation to increase the borrowing cap through the chamber this week to jump start talks with the White House.
When the US hit its debt ceiling in January, Treasury Secretary Janet Yellen informed Congress that cash on hand and “extraordinary measures” should last at least until early June. A variety of forecasters estimated that the so-called X-date, when the US would default, would arrive over the summer or in the early fall.
Yellen is expected to update her projection in the near future as the department gets a clearer picture of how much it collected in tax revenue for 2022 and the first quarter of this year.
But analysts are warning that it doesn’t look good. While tax receipts were always expected to be below 2021’s robust levels, they are even weaker than forecast – down around 35% so far.
That is prompting Goldman Sachs analysts to now say that an early June deadline looks “nearly as likely” as the late July deadline that they project. It noted in a Friday report, however, that Treasury has only received around 56% of the expected tax collections.
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