After numbers showing the extent of the Treasury’s tax day cash infusion could have been more impressive. It’s still uncertain whether the US will avoid the threat of a debt-ceiling-related default before the end of the summer.
On Tuesday, just $108.47 billion more was available for the US government to pay its debts. That might be sufficient to carry it out. However, TD Securities strategist Gennadiy Goldberg thinks it might be a close call.
The Increased Cash Position
The tax receipts collected on Tuesday increased a cash reserve that had been reduced to stay within the country’s statutory debt ceiling. According to Bloomberg news, the Treasury Department’s cash position increased to $252.55 billion on Tuesday from $144.08 billion the day before as payments tied to the Internal Revenue Service’s primary annual filing deadline came in.
The Treasury’s bank account has been under strain recently as safeguards are being taken to avoid exceeding the $31.4 trillion debt ceiling. Last week, it fell as low as $86.55 billion.
Treasury funds have increased to a level last seen on March 20 due to the adjustment in the cash balance. It will be interesting to see if it gives Congress enough time to resolve the debt-limit impasse and prevent a technical default.
The one-day rise is only the largest since January 24, when the Treasury received more than $101 billion in net additional money from settlements related to bill sales.
Prior to the anticipated inflow of tax money on June 15—when certain taxpayers have payments due—revenues must be able to fund the Treasury. If so, closing the gap with the following steps on June 30 may delay default until later in the summer. On the other hand, if they prove insufficient, the administration may not even last until June 15.
Various Estimations
The so-called drop-dead date has been subject to a wide range of estimations up to this point, ranging from early summer to the US autumn. Still, information on the government’s cash position may allow investors to narrow their perspectives.
On Wednesday, US House Speaker Kevin McCarthy announced his idea to raise the country’s borrowing limit. However, with additional spending restraints, lawmakers’ attention will likely turn more and more to the rapidly closing bargaining window. The 320-page proposal would raise the debt ceiling by $1.5 trillion, preventing a US payment default until March 31, 2024. It also includes several conservative ideas unpopular with the White House and legislative Democrats.
