so big cash infusion that Congress passed last year to shape the embattled IRS is having an unexpected side benefit.
He increased funding has helped the agency catch up with the processing of new and overdue tax returns. And that, in turn, has allowed federal bean counters to give policymakers a more accurate picture of when the Treasury might run out of money: the the so-called date X — if the government is unable to borrow more.
The nation is moving uncomfortably close to an unprecedented default that could have catastrophic effects on the world economy because it is running up against its legal borrowing limit. Congress and the White House have been unable to agree on a plan to lift or suspend the borrowing limit. Debt bridges the gap between the revenue collected by the government and the programs, projects, and services it provides.
Meanwhile, the Treasury is using «extraordinary measures» to prevent the United States from running out of cash. Date X arrives when the Treasury has exhausted those accounting solutions.
Nina Olson, former director of the Office of Taxpayer Advocate, said the latest X-date calculation, provided through IRS data, offers a contrast to the agency’s underfunding in previous years.
During the pandemic, the IRS was so far behind that it was still processing 2020 returns as of early 2022.
“They have a better idea of what the receipts will be,” Olson said. IRS and Treasury spokesmen declined to comment.
Treasury Secretary Janet Yellen told Congress this week that the US could default on its debt as of June 1 if lawmakers don’t elevate or suspend the nation’s borrowing authority. That same day, the Congressional Budget Office reported that it was also able to focus on a more precise date X because the IRS is «processing tax returns faster than last year.»
Tax and policy experts say updated IRS data is invaluable in understanding the nation’s financial position as the debate over whether to raise the debt limit drags on.
“That, in combination with lower-than-expected receipts through April, means Treasury’s extraordinary measures will run out sooner than we had previously projected,” the CBO director said. Phil Swagel said in his report.
Date X is usually not a specific date, it is a time interval. That’s because it reflects not only money going into the government, but also cash going out. Even if the government has a better idea of tax revenue, it might have to reimburse a state government, pay a contractor, or face expenses that make date X a moving target.
Natasha Sarin, a Yale Law School professor who previously served as Yellen’s counsel on IRS issues, said the latest tax data reveals the «tremendous uncertainty that exists in determining the precise date X.»
The CBO, Moody’s Analytics and the private Bipartisan Policy Center try to estimate the time frame for potential default using data on government cash flows and changes in debt. But even its leaders say no one knows exactly when Date X might arrive.
That depends on the billions of dollars flowing in and out of federal coffers all the time.
Mark Zandi, chief economist at Moody’s Analytics, said Thursday at a Senate Budget Committee Hearing which estimates date X to fall around June 8.
The closer the nation approaches a possible default, the more dangerous the nation’s financial situation becomes and the more accurate X-date forecasts become, economists say. President Joe Biden has invited the four main leaders of Congress to the White House on Tuesday for talks, signaling growing fears of a default.
Daleep Singh, who served as deputy national security adviser previously in the Biden administration, said the new fiscal data lends credibility to the most recent Treasury assessment of the projected default date.
He called the brinkmanship of the debt ceiling a national security issue, especially as the US government’s relationship becomes more strained with China, as a major creditor holding US debt. .
“This is an issue that affects our financial stability,” he said. «If we make an unforced error, we are giving a gift to our opponents.»