She noted it could come as early as June 1 but could be a number of weeks later.Įven if the Treasury Department doesn’t completely run out of funds, it could be difficult for the agency to manage its payments and stay below the debt ceiling when it only has a tiny cash balance, Akabas said. In Yellen’s letter to House Speaker Kevin McCarthy last week, she said the exact date of default is impossible to pinpoint since the amount of revenue the federal government collects and the amount it spends is variable. This is due mainly to a drop in capital gains income and weakening corporate profit margins. Tax receipts are running $150 billion below government projections for fiscal year 2023, which began in October, according to a report issued Monday by the Penn Wharton Budget Model, an independent research organization.
Interactive: The $31.4 trillion debt dilemma But the X-date could hit as soon as June 1 or as late as early August, according to that analysis.Ĭumulative income tax receipts are tracking more than 30% below collections a year ago, in part because of weaker capital gains revenue as a result of last year’s stock market declines, Moody’s said. Meanwhile, Moody’s Analytics last week pegged the default date at June 8, significantly earlier than its prior projection of August 18. In February, it projected the default could take place during the summer or early fall. The so-called X-date, when the US could default, could arrive between early June and early August, according to the center. “If a solution is not reached before June, policymakers may be playing daily Russian roulette with the full faith and credit of the United States, risking financial disaster for their constituents and the country.” “The coming weeks are critical for assessing the strength of government cash flows,” said Shai Akabas, the center’s director of economic policy. Biden is meeting with congressional leaders Tuesday to work on a deal, the first movement in months.Ī weaker-than-expected tax season, spurred in part by disaster-related filing extensions for much of California and parts of Alabama and Georgia, has increased the odds that Treasury won’t have enough funds to pay the federal government’s bills in early June, according to an updated estimate released Tuesday by the Bipartisan Policy Center. The projections, which are roughly in line with those issued last week by Yellen and the Congressional Budget Office, add to the pressure on House Republicans and President Joe Biden, who may have only a few weeks to hammer out their vast differences over addressing the debt ceiling. Two new analyses are backing Treasury Secretary Janet Yellen’s forecast that the nation could default on its debt – and unleash economic chaos – as soon as early June if Congress doesn’t act.
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