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Treasury risks payment default as soon as August, CBO says

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The Congressional Budget Office warned that the federal government could run out of enough money to pay all of its bills on time as soon as August if lawmakers fail to raise or suspend the debt limit.

The Treasury Department has been using special accounting maneuvers since Jan. 21 to avoid breaching the $36.1 trillion debt ceiling, which kicked in at the start of the year. But the department has yet to offer specific guidance on when those measures will be exhausted.

“If the debt limit remains unchanged, the government’s ability to borrow using extraordinary measures will probably be exhausted in August or September 2025,” the CBO, a nonpartisan arm of the U.S. legislature, said in a statement Wednesday. “The projected exhaustion date is uncertain because the timing and amount of revenue collections and outlays over the intervening months could differ from CBO’s projections.”

The CBO also said that, “If the government’s borrowing needs are significantly greater than CBO projects, the Treasury’s resources could be exhausted in late May or sometime in June, before tax payments due in mid-June are received or before additional extraordinary measures become available on June 30.”

Going past the so-called X-date would necessitate the Treasury defaulting on “some obligation,” then-Secretary Janet Yellen said during the last congressional battle to address the debt limit, in 2023. Scott Bessent, who took the Treasury’s helm in January, told lawmakers in his confirmation hearing the U.S. “is not going to default on its debt” with him in the job.

Congressional wrangling

The CBO projection for X-date provides lawmakers with a rough estimate on how much time they have to raise or suspend the debt ceiling to avoid such a crisis.

House Republicans have pushed to include raising the debt limit in legislation to enact President Donald Trump’s top priority — extending his 2017 tax cuts, much of which expire at year-end. The House took one step toward that last month, passing a budget proposal that included raising the debt ceiling by $4 trillion.

Senate Majority Leader John Thune on Tuesday said there is “consensus forming” around attaching a debt-limit provision to the tax package as part of a so-called reconciliation bill, which the GOP could pass without Democratic votes. It’s not clear, however, whether there’s sufficient support among Senate Republicans for addressing the debt limit through that process.

The 2023 debt-ceiling suspension was done on a bipartisan vote.

Earlier this week, the Bipartisan Policy Center released its own X-date estimate, putting it sometime between mid-July and October. Wall Street strategists have estimated the date could fall around late-July to late-August. Some forecasts, however, put the timing as early as late May.

Much depends on tax-collection proceeds, with the April 15 filing date fast approaching. House Ways and Means Committee Chair Jason Smith warned earlier this month that a debt-ceiling breach was possible as soon as mid-May if the Treasury brings in less revenue than expected.

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Accounting

Acting IRS commissioner reportedly replaced

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Gary Shapley, who was named only days ago as the acting commissioner of the Internal Revenue Service, is reportedly being replaced by Deputy Treasury Secretary Michael Faulkender amid a power struggle between Treasury Secretary Scott Bessent and Elon Musk.

The New York Times reported that Bessent was outraged that Shapley was named to head the IRS without his knowledge or approval and complained to President Trump about it. Shapley was installed as acting commissioner on Tuesday, only to be ousted on Friday. He first gained prominence as an IRS Criminal Investigation special agent and whistleblower who testified in 2023 before the House Oversight Committee that then-President Joe Biden’s son Hunter received preferential treatment during a tax-evasion investigation, and he and another special agent had been removed from the investigation after complaining to their supervisors in 2022. He was promoted last month to senior advisor to Bessent and made deputy chief of IRS Criminal Investigation. Shapley is expected to remain now as a senior official at IRS Criminal Investigation, according to the Wall Street Journal. The IRS and the Treasury Department press offices did not immediately respond to requests for comment.

Faulkender was confirmed last month as deputy secretary at the Treasury Department and formerly worked during the first Trump administration at the Treasury on the Paycheck Protection Program before leaving to teach finance at the University of Maryland.

Faulkender will be the fifth head of the IRS this year. Former IRS commissioner Danny Werfel departed in January, on Inauguration Day, after Trump announced in December he planned to name former Congressman Billy Long, R-Missouri, as the next IRS commissioner, even though Werfel’s term wasn’t scheduled to end until November 2027. The Senate has not yet scheduled a confirmation hearing for Long, amid questions from Senate Democrats about his work promoting the Employee Retention Credit and so-called “tribal tax credits.” The job of acting commissioner has since been filled by Douglas O’Donnell, who was deputy commissioner under Werfel. However, O’Donnell abruptly retired as the IRS came under pressure to lay off thousands of employees and share access to confidential taxpayer data. He was replaced by IRS chief operating officer Melanie Krause, who resigned last week after coming under similar pressure to provide taxpayer data to immigration authorities and employees of the Musk-led U.S. DOGE Service. 

Krause had planned to depart later this month under the deferred resignation program at the IRS, under which approximately 22,000 IRS employees have accepted the voluntary buyout offers. But Musk reportedly pushed to have Shapley installed on Tuesday, according to the Times, and he remained working in the commissioner’s office as recently as Friday morning. Meanwhile, plans are underway for further reductions in the IRS workforce of up to 40%, according to the Federal News Network, taking the IRS from approximately 102,000 employees at the beginning of the year to around 60,000 to 70,000 employees.

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Accounting

On the move: EY names San Antonio office MP

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Carr, Riggs & Ingram appoints CFO and chief legal officer; TSCPA hosts accounting bootcamp; and more news from across the profession.

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Accounting

Tech news: Certinia announces spring release

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Certinia announces spring release; Intuit acquires tech and experts from fintech Deserve; Paystand launches feature to navigate tariffs; and other accounting tech news and updates.

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