House Speaker Kevin McCarthy and President Joe Biden likely have a little more time to work out a deal to avoid a catastrophic debt default, thanks to procrastinating taxpayers.
The Treasury Department got a surge of tax revenue earlier this week, which should provide it with the cash it needs to pay the federal government’s bills for a longer period of time. Until now, tax collections had been coming in much weaker than expected, leading analysts to predict that an early June default date was increasingly likely unless Congress acted.
Currently, it looks like Treasury will be able to cover the government’s obligations at least until the second half of July, according to reports released Thursday by Goldman Sachs and Oxford Economics.
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 have 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.
Tax receipts were always expected to be below 2021’s robust levels, which were buoyed by a strong stock market that year. Until this week, however, April collections had been down around 35% compared with a year ago, which was greater than anticipated.
But they are now down about 29%, which is just a touch more than the level Goldman Sachs had assumed in its late July default scenario.
If collections stay on this trend, Treasury is expected to come within $60 billion of exhausting its resources in the second week of June but should be able to continue making all scheduled payments…
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