Thursday, February 1, 2018

Federal Government Will Be Unable to Pay All Bills Sooner Than Expected, Due to New Tax Law

Imagine my surprise.

The U.S. government’s cash reserves are expected to run out faster than expected, the Congressional Budget Office said Wednesday, a result of lost revenue from last year’s tax cut law, reports The Washington Post.

If the debt ceiling isn’t raised by the first half of March, CBO said, “the government would be unable to pay its obligations fully, and it would delay making payments for its activities, default on its debt obligations, or both.”

The debt ceiling had been suspended until Dec. 8, 2017, and the Treasury Department has taken emergency steps since then to delay falling behind on payments. But it can only use those measures for a short period of time, and CBO said Wednesday that this window is narrower than it previously thought.

CBO said that the tax law is expected to lower tax receipts by $10 billion to $15 billion per month. Even though the tax cut law went into effect January 1, the large drop in tax receipts didn’t kick in yet because companies won’t start using new withholding tables until sometime in February.

“Withheld receipts are expected to be less than the amounts paid in the comparable period last year,” CBO said. “In addition, the government ran a deficit of $23 billion in December, and it normally runs a deficit in the second quarter of the fiscal year.”

In total, the tax law will lead to a drop in revenue of $136 billion in revenue in 2018, the Joint Committee on Taxation has estimated.

WaPo adds:
The next opportunity to raise the debt ceiling would likely come in the next few days, as lawmakers have to vote by February 8 to authorize government spending or risk another government shutdown. But adding an increase in the debt ceiling could drive away support from GOP hardliners, and it’s unclear whether Democrats would support another spending bill if they don’t believe there has been any progress on a new immigration law.

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