As the United States continues to grapple with the
debt ceiling issue, uncertainty looms over whether
the country will make it through to late summer
without risking a debt-ceiling-related default. On
Tuesday, the US government's cash balance rose by
just $108.47 billion, indicating a lackluster tax day
cash influx. TD Securities strategist Gennadiy
Goldberg suggests that while this might be enough to
help the US government see it through, it could still
be a close call.
The Treasury Department's cash balance has been
under pressure lately due to measures taken to avoid
breaching the $31.4 trillion debt cap, and last week it
dwindled to as little as $86.55 billion. However, the
tax receipts received on Tuesday have boosted the
Treasury's coffers to a level last seen on March 20.
Bank of America Corp. strategists wrote last week
that an increase in the Treasury cash pile of more
than $200 billion following tax day would be strong,
while a figure of less than $150 billion would be
weak, based on historical precedent. The one-day
increase is only the biggest since Jan. 24, a date that
saw the Treasury get more than $101 billion in net
new cash from bill-sale settlements.
A key question now is whether the revenues are big
enough to get the Treasury through until the
anticipated influx of tax money on June 15, when
some payers have installments due. If so, then it is
likely to bridge the gap to the next available
extraordinary measures on June 30 and stave off
default until later in the summer. But if they end up
being insufficient for that, then the government
might not even make it to June 15.
Analysts poring over the numbers were uncertain
about whether the influx would be enough. TD's
Goldberg believes that it will be close, but they should
be able to get past June 15th, which should put the X-
date sometime in late-July or early-August. Estimates
for the so-called drop-dead date have been wide until
now, but detail on the government's cash position
this week could help investors and officials to refine
their views.
As the window for negotiations narrows, it is likely to
become an increased focus for lawmakers in the
coming weeks. US House Speaker Kevin McCarthy
unveiled his plan to lift the nation's borrowing limit
on Wednesday, but not without new curbs on
spending. The plan would increase the debt ceiling by
$1.5 trillion, enough to stave off a US payments
default until March 31, 2024 at the latest. However, it
also contains a host of conservative proposals that
are non-starters with congressional Democrats and
the White House.
Overall, the US government's ability to avoid a debt-
ceiling-related default remains uncertain, and it
remains to be seen whether lawmakers can find a
solution to this ongoing issue.
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