Now that the U.S. has bumped against the federal debt limit, the Treasury Department is taking “extraordinary measures” to keep paying its bills – basically shuffling funds and delaying payments in some non-essential areas to make sure it can meet its obligations. Per Bloomberg, an analysis by the financial services firm Jefferies Group finds that those measures will provide the Treasury with a cushion of about $500 billion through early summer.
Treasury Secretary Janet Yellen informed congressional leaders that she is suspending investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund in order to free up cash for other essential uses. According to Jefferies, those moves will provide headroom of about $350 billion through early June. Another opportunity to suspend reinvestment in the civil service fund that will occur in June, potentially providing another $143 billion in headroom.
Analysts are still debating when the day of potential default – the so-called X-date – will arrive, with some banks saying the U.S. could make it through the summer, though much depends on the strength of the economy over the next two quarters. “The big question, of course, is what tax revenues look like in the coming months as the economy slows,” Gennadiy Goldberg, a senior US rates strategist at TD, told Bloomberg. “A slowing in tax revenues may pull estimates for the X-date forward.”