Apr 25, 2023 - Economy

Wall Street analysts are pulling forward their debt ceiling "X-date" estimates

Data: FactSet, Federal Reserve; Chart: Axios Visuals

Wall Street analysts are keeping an increasingly close eye on the U.S. Treasury's published finances, as they try to estimate when the Federal government could run out of money if the debt ceiling isn't lifted.

The big picture: The U.S. reached its statutory debt limit of $31.4 trillion in January, constraining the Treasury's ability to borrow.

  • The government can get along alright for a while via "extraordinary measures" to ensure it meets its obligations. That means deferring payments to some government pension plans and using up its existing cash balances, among other financial tweaks.
  • But as time goes on it gets harder and harder.

State of play: Analysts have been watching recent tax receipts especially closely, hoping that a bumper crop of tax payments could push out the day of reckoning — also known as the "X-date," when the government runs out of money and could default on payments. But no dice.

  • It's true that that balance at the Federal government's checking account at the Federal Reserve — the Treasury General Account, charted above — got a bump over the last few days.
  • But analysts have noted that tax receipts have been coming in lower than anticipated, perhaps partially due to a drop in capital gains taxes given the awful year the markets had in 2022.

What they're saying: "April tax receipts have been on the low side of our expectations and the deficit is tracking higher," analysts with BofA Securities wrote in a note on Friday. They pulled forward their X-date estimate to early August (from mid-August), and added that it "could easily slip to late July."

  • Separately, Goldman Sachs analysts wrote that their "base case remains for the debt limit deadline to fall in late July. However, the odds of an early June deadline have edged up."
  • For the record, the Treasury Department itself has said it will start running out of wiggle room in early June.

The bottom line: The pressure on the White House and congressional Republicans to reach some sort of deal could get serious pretty quickly.

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