New report: US government now at risk for default

Lower-than-expected tax revenues now mean there is a “significant risk” that the federal government will run out of borrowing authority in the early part of September, according to a new analysis by the Bipartisan Policy Center, a Washington think-tank and advocacy group. The report adds urgency to Washington budget and debt talks that have yet to go anywhere.

The main culprit is that tax revenues are persistently weaker than anticipated, said Shai Akabas, the group’s economic policy director, growing by two percent to three percent instead of the five percent to six percent anticipated earlier. The group, which has had a good track record in prior estimates, said two months ago that policymakers had until at least October before the threat of default.

Also on Monday, the Congressional Budget Office estimated that the government posted a budget deficit of $746bn for the first nine months of the fiscal year of 2019, on track to approach or top $1 trillion. Revenues were $69bn higher and federal spending was $208bn higher over that period. Market analysts warn that defaulting or US obligations could spook investors, slam debt markets and increase borrowing costs for the government and individuals.