New Treasury Secretary Jack Lew told CNBC that the United States may not reach its debt ceiling until Labor Day. Just a few months ago, many experts believed that the president and Congress would have to wrestle with the issue well before then. However, it seems that tax receipts, particularly from individuals, have been stronger than expected. Government spending has slowed, at least a bit. And the austerity measures currently in place likely will further mute government spending.
Receipts should continue to be strong due to tax rate increases. The taxes have not ruined consumer spending, although perhaps they have slowed it. The contentious nature of the debate about spending cuts will not go away. The threat that a new budget will not be passed by Labor Day also will not disappear. Put another way, the war over the government’s spending caps remains, but it most likely will get to take the summer off.
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