Why This Week's Tax Data Could Lead To A Much Earlier Debt Ceiling Crisis

Back in January, when the US was just days away from hitting (again) the statutory debt limit, and when we looked at the latest forecast for when the US Treasury would hit the so-called X-date, i.e., the point in time beyond which all Emergency Measures have been used up and when a technical default for the US looked all too possible, we said that according to Goldman calculations the US may have "until August, and possibly as long as October to raise the debt limit."

Three months later, things have changed for the worse as a result of a notable spike in the US deficit (the result of less tax revenue and far more governmental outlays), and as the next chart below shows, the Treasury General Account, or the cash balance parked by the Treasury at the Fed, has dwindled rapidly and was in the double digits as of Friday, the lowest since the end of 2022 (when the Treasury was set to rapidly replenish its cash holding), an amount that unless a debt ceiling solution is found fast could lead to market chaos.