Goldman Sachs sees late July deadline for hiking debt limit
The government is unlikely to hit the drop-dead date for raising the debt limit until late July, Goldman Sachs said Wednesday.
A late-breaking surge in tax collections around the April 18 filing deadline is giving economists at the investment bank increased confidence that lawmakers won’t have to act until shortly before their August recess.
The Treasury Department is expected to update its projection of the so-called “X date” as soon as this week.
The deadline turns heavily on tax receipts, which are volatile, and economists have been closely watching how collections around the filing deadline shake out. Capital gains taxes in particular are way down after last year’s wipeout on Wall Street.
Goldman Sachs had earlier raised the possibility of lawmakers having to move in the first half of June when revenues initially appeared to be coming in much weaker than anticipated.
“We maintain our base case that the debt limit deadline will be in late July, now with increased confidence as revenues are once again close to our projections,” economists there said in a note.
The revised projection comes as House Republicans approved a slew of budget cuts tied to raising the legal cap on government borrowing, a plan that will be a nonstarter with Democrats in the Senate and White House.
Negotiations between the two sides have not yet begun in earnest, and a late July deadline would mean it will still be some time before lawmakers begin to seriously wrestle over how to proceed.
After booming over the past couple years — tax receipts were up by roughly 20 percent in each of the past two years, the biggest back-to-back increase since the Truman administration — collections are now coming back to Earth.
Non-withheld receipts, which are taxes that aren’t subject to withholding, such as capital gains levies, are down so far this month by 29 percent, Goldman said.
Treasury has been relying on cash it has on hand and accounting tricks to avoid breaking the debt limit.