of letter to parliament Treasury Secretary Janet L. Yellen has repeatedly issued an important warning, warning business leaders of the devastating consequences if the United States defaults.
She cannot give an exact date when federal funds will run out.
The U.S. hit the $31.4 trillion statutory debt ceiling on Jan. 19, borrowing billions to pay the country’s bills, and the Treasury Department announced an unusual move to save cash and avoid violating the ceiling. was forced to initiate an accounting operation known as the
Yellen on Monday reiterated earlier warnings that the Treasury Department could run out of cash on hand by June 1. Still, it’s nearly impossible to determine the exact date when the U.S. will have its so-called X-date.
“These estimates are based on currently available data and federal revenues, expenditures and debt may differ from these estimates,” Yellen wrote to lawmakers. “The actual date for the Treasury Department to take extraordinary action could be days or weeks later than these estimates.”
The Treasury Department has the world’s most sophisticated cash management system and employs a team of highly trained economists, but its vaults are vague about payments being spent and tax receipts coming in.As was the case Wednesday, when the Treasury’s general account day began when the Treasury’s cash balance was painfully low Less than $100 billion — Exactly determining the X date is even more difficult to predict. Because in many ways, the moment a default occurs is a moving target.
A large bill is due for payment.
Since Yellen first warned Congress about the debt ceiling in January, she has noted that early June will be a pivotal month. The reason: The federal government spends so much money in such a short period of time around June 1 that it’s impossible to predict exactly when and how much money will come in.
The Bipartisan Policy Center, a think tank that closely tracks federal spending, estimated the government will spend $101 billion on June 1 in a report released Thursday. Most of that money, or $47 billion, will go to Medicare, and the rest to Medicare. Dedicated to Veterans Benefits, Military Salaries and Retirement Benefits, Civil Servant Retirement Benefits, and Additional Security Income. On June 2nd, the government will have to pay out $25 billion in Social Security benefits and another $2 billion in Medicaid.
Over the two days, the government is expected to spend about $140 billion and tax revenue is expected to be just $44 billion, leaving the coffers in smoke.
Earnings skyrocket as refunds occur.
One of the big problems this year is that tax revenues are coming in at a slower pace than expected.
Severe storms, flooding and landslides in California, Alabama and Georgia this year have pushed the Internal Revenue Service to postpone the April 18 tax filing deadline to October in dozens of counties.
Another surprising reason cash is lower than some budget experts expected is that the IRS is starting to operate more efficiently. The agency received $80 billion last year as part of an anti-inflation bill that helped it create more jobs and slowly reduce its outstanding balance of tax returns.
Because the IRS is processing returns more quickly, refunds are paid out more quickly, depleting the amount of available cash.
June 15th is an important day.
If Yellen can find enough coins on the Treasury couch to pay her bills through June 15, the U.S. might have some leeway.
June 15th is the third quarter payment deadline for businesses and individuals who need to pay taxes throughout the year, or for those who choose to pay every three months to avoid a large bill coming in April. Because it is
The Congressional Budget Office said in a report last week that the quarterly influx of tax revenue expected on June 15 and the availability of additional temporary measures will likely allow the government to continue fiscal operations through at least the end of July.
The government could get about $80 billion in tax revenue that day. The Bipartisan Policy Center estimates that these funds could be enough to keep the federal government alive through June 30. At that point, Yellen would also have additional special measures at her disposal, such as a moratorium on investing in retirement funds for federal employees. That would give her another $145 billion and could delay her default until July.
too close to call
The lack of clarity on X-Date makes it difficult for lawmakers to grasp how much pressure they are under to reach a deal. Governments may not know how quickly cash will run out until just before the country defaults.
But the pressure is still building. It will take days, if not weeks, for Congress to pass a bill to raise the debt ceiling. And even if President Biden and Speaker Kevin McCarthy reach a deal, there’s no guarantee that the House and Senate will easily pass the bill.
As summer approaches, the legal calendar becomes more and more complicated.
McCarthy and New York Democrat Majority Leader Chuck Schumer must pass legislation reflecting the agreement through their respective Houses, and the days left to do so are rapidly dwindling. The House will be in session for just six days until the end of the month. The Senate, with just five seats, is scheduled to leave Washington on Monday, the weekend before Memorial Day.
Bearing in mind lawmakers’ reluctance to change recess dates, analysts are closely monitoring Congress’ schedules as they try to read the outlook for debt limits. If no deal is reached by Memorial Day and Ms Yellen does not announce a postponement of the X-Date, the likelihood of a short-term suspension of the borrowing cap to give Congress time to act could increase. be.
“Congressional dates are paramount and, as they have always been, will determine the urgency and passage date of legislation,” Henrietta Treys, director of economic policy at Veda Partners, said in a memo to clients earlier this month. said.
