Goldman Sachs projects debt limit could be reached ‘in the first half of June’

Goldman Sachs economists predicted that the U.S. could hit its debt ceiling earlier than they originally expected, saying on Tuesday it is possible the limit is reached in the first half of June.

Goldman economists were originally forecasting that after the Treasury Department announced it would take “extraordinary measures” to be able to continue paying its bills earlier this year, it would be able to continue with those measures until sometime in early August. But citing “weak tax collections” in April, Goldman said there was an “increased probability that the debt limit deadline will be reached in the first half of June.”

The economists conceded that the data was still “very preliminary” and said they still see a greater chance that the limit is reached in late July.

“But this could easily change to a base case of early June if tax receipts continue to undershoot,” the economists said.

Talks in Washington over raising the debt ceiling have largely stalled. The White House and Democrats have said they want to pass a debt ceiling increase without any strings attached, while Republicans have demanded commitments on spending cuts in exchange for passing the ceiling increase.

Goldman economists said that a June deadline would raise the possibilities of lawmakers reaching a short-term extension on the debt ceiling, giving them more time to negotiate a longer-term solution.

“We are generally skeptical of reports that congressional Republicans might pass a short-term debt limit extension, as voting to raise the debt limit twice is harder than voting once,” the economists said. “That said, if the Treasury announces in May that the deadline is only a few weeks away, there would be little time to negotiate a deal and a short-term extension could provide a way out.”

A Treasury spokesperson pointed to Treasury Secretary Janet Yellen’s letter to lawmakers in January, in which she said it was difficult to predict a timeline for reaching the debt ceiling because it was difficult to predict government revenues months in advance.

“While Treasury is not currently able to provide an estimate of how long extraordinary measures will enable us to continue to pay the government’s obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June,” she said in the January letter.