US tax inflows hint that Treasury Department can avoid default until late July – Goldman Sachs

With the latest tax receipt numbers from the US being impressive, the Goldman Sachs (GS) raise expectations that the US Treasury Department can avoid the risk of a federal payments default until late June.

Bloomberg quotes Alec Phillips, a Goldman Sachs economist while suggesting a positive development, especially after the passage of the "Limit, Save, Grow Act" in the US House of Representatives.

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Key quotes

If the remaining receipts stay on this trend, the Treasury should be able to continue to make all scheduled payments until the end of July without an increase in the debt limit.

Goldman now sees the department getting within $50 billion to $60 billion of exhausting its resources in the second week of June.

The bill’s passage is likely to put weight behind Republican insistence that the White House and congressional Democrats engage in negotiations on policy changes to accompany a debt limit increase.

Assuming a late July deadline, those negotiations might not begin for a few weeks, if not longer. 

In our view, the most likely policy to accompany a debt limit increase is a cap on discretionary spending that’s less than the House GOP plan.