He added that Yellen’s early warning of June 1 is also very possible, as is a “best case scenario” of Aug. Mark Zandi, the chief economist for Moody’s Analytics, told senators during a Budget Committee hearing on Thursday that the X-date could fall on June 8. would officially default - thanks to the often unpredictable nature of federal cash flows.Īfter Yellen issued her warning last week, the independent Congressional Budget Office also said it sees “a significantly greater risk that the Treasury will run out of funds in early June.” Other estimates that point to a potential debt catastrophe in early June also underscore that considerable variability in the X-date will remain - until perhaps just days before the U.S. economy in the coming weeks stems in part from a disappointing tax season, mixed with delayed tax filing deadlines for residents of states like California that sit in designated disaster areas, Akabas said. The Treasury cash crunch that could cripple the U.S. “I still don’t think now is the time for panic, but it’s certainly time to start getting concerned,” Akabas said, noting that Treasury “is skating on very thin ice” next month due to low cash flows. The coming weeks will offer more clarity about whether Treasury can make it to mid-June and give Congress and the White House a longer ramp to negotiate a debt limit deal, said Shai Akabas, BPC’s director of economic policy. If Treasury can hold off a default until the end of June, it would be able to tap into about $145 billion in new “extraordinary measures,” buying the government a little more borrowing power into the summer. When really is the X-date? It’s hard to say. What remains unclear, though, is whether the Treasury Department can limp along paying the bills until June 15, when quarterly tax receipts would provide a cash infusion and likely stave off default through the end of next month. The think tank’s new projection piles further urgency onto Tuesday’s debt limit meeting at the White House, despite slim prospects for a major breakthrough between Democrats insisting on a straightforward hike and Republicans pushing for major concessions in return for their debt votes. A more likely scenario, in the event of a default, is that Treasury would choose to delay all bills, waiting until there’s enough revenue to cover all payments for any given day, the Bipartisan Policy Center said. The Biden administration has already dismissed the untested idea of paying some bills but not others, arguing that it would be unfair to average Americans, cause widespread economic disruption and prove logistically impossible. And those hugely significant payments are just a few that could be affected, the Bipartisan Policy Center cautioned, and don’t represent an “exhaustive” list “of all cash flows on a particular day.”
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