A sudden acceleration in US tax inflows has reduced the likelihood of the Treasury Department being at risk of a federal payments default as soon as June, according to Goldman Sachs Group Inc.
The Wall Street bank last week had warned that anemic revenues were raising the danger of pulling forward the point at which the US government will exhaust its borrowing authority under the federal debt ceiling. But data on tax receipts for Tuesday — when paper checks for federal tax payments were coming in — were unexpectedly large, outpacing the comparable 2022 day by 14%, according to Goldman.
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“If the remaining receipts stay on this trend” the Treasury should “be able to continue to make all scheduled payments until the end of July without an increase in the debt limit,” Alec Phillips, a Goldman economist, wrote in a note to clients Wednesday. Goldman now sees the department getting within $50 billion to $60 billion of exhausting its resources in the second week of June.
Meantime, there’s no sign of any compromise in the partisan battle in Washington over extending the debt limit. House Republicans on Wednesday passed a bill to increase it for about a year, while slashing spending for years to come. President Joe Biden and congressional Democrats reject attaching conditions and continue to press for a straightforward bill, such as Congress approved for former President Donald Trump.
The bill’s passage is “likely to put weight behind Republican insistence that the White House and congressional Democrats engage in negotiations on policy changes to accompany a debt limit increase,” Phillips said. “Assuming a late July deadline, those negotiations might not begin for a few weeks, if not longer. In our view, the most likely policy to accompany a debt limit increase is a cap on discretionary spending” that’s less than the House GOP plan, he said.
