US Default -- How It Plays Out -- According To The WSJ -- May 20, 2023

Locator: 44696ECON.  

Link here, and somewhat interactive.

US national debt: $31 trillion.

FY2023: How much does the debt ceiling need to be raised this year: ~ $1.5 trillion.

• 1.5 / 31 = 5%

FY2022:

• total government spending: $6.27 trillion
• total revenue: $4.90 trillion
• a deficit of $1.38 trillion (FY22)
• a decrease of $1.40 trillion from the previous fiscal year

Why is "x" day most likely June 1?

Current talk:

• "x" day: June 1, 2023 -- probably not sooner; that's because military pay/pensions go out at end of month; though Social Security payments are made throughout the month, but Congressional votes would be held daily, if necessary, to ensure SocSec payments are made; US interest on debt could easily be missed.
• military pay and pension: deposited in banks on June 1, 2023 -- will probably "be safe" for month of June; default certainly won't last through an entire month
• June 1, 2023: deficit at that moment in time estimated to be $75 billion (Janet Yellen can easily find $75 billion to pay military)
• June 1, 2023: $47 billion in Medicare; everyone knows how that plays out; so Medicare is not a problem
• June 2, 2023: $25 billion in Social Security benefits (again, Janet Yellen can easily find $25 billion to make that payment
• June 15, 2023: US Treasury to receive $79 billion in revenue from quarterly filers; $2 billion interest payment must also be met;
• the calendar continues,but ther's no way the government defaults for more than a few days after "x" day

If "x" day falls any later than June 1, 2023, it's unlikely military would be affected at all.

To withhold Social Security checks would be political suicide; not sure who would get most blame but the fact would remain: first US default (in modern history) would occur under a Biden administration

"Easiest" source of cash from general fund:

• payments to defense contractors for a few days;
• foreign aid payments
• UN dues
• property taxes and rent due by government agencies to states and REITS
• and, then, of course, the "go-to" fix: shut down the national parks.

If the US gets through June 1, 2023, some folks think think the "default" story could be pushed out a few more months.