Does Extra Tax Revenue Give Debt Deal More Time?
STEVE INSKEEP, Host:
Welcome to the program.
ZACHARY GOLDFARB: Thanks. Good to be here.
INSKEEP: What makes this a moveable date?
GOLDFARB: Well, we might have a little bit of breathing room, mainly because tax revenues in the month of July have been a bit higher than had been anticipated. And so a number of financial analysts are saying that Treasury can probably manage for at least a few more days, if not a few more weeks, before failing to meet obligations. But again, this is just a little bit of breathing room, and doesn't remove urgency from the need to come up with some sort of longer-term deal.
INSKEEP: That's - it's useful, though, to hear this information, because it reminds us what the problem would be. It's a cash flow problem, as you'd put it, right? Because there would be money coming in. The question is how much, and whether it's enough to pay any given set of bills on any given day.
GOLDFARB: So there's a little bit of breathing room, but the cash flow will run very tight. We don't know exactly what tax revenues will be, and we don't know how the markets will respond.
INSKEEP: Well, there is another point, because, of course, there are some lawmakers who are questioning whether blowing past the debt deadline is really even a very big deal. It sounds, from what you're saying, that the financial experts, the people on Wall Street that you're talking with do still think it's a big deal, even though it's hard to pin down the exact date of catastrophe.
GOLDFARB: People think that there's nothing better than the U.S. right now, so people might still show up for those auctions. But you don't know for sure.
INSKEEP: Well, that's the question. You've got trillions of dollars of U.S. bonds outstanding, and billions, many billions coming due on that day and on many other days. Is there any possible, even a remotely plausible - alternative for where the Chinese are anybody else who has a lot of money could put their cash?
GOLDFARB: It's kind of being, like, president of the United States. You have a good - you have a job that can often be very difficult, but he's not going to quit it. So China and other major investors don't really have another good option.
INSKEEP: Well, just in a couple of seconds, does that mean that even if the U.S. credit rating is lower, that that might not actually affect the interest rate very much on bonds? Because that interest rate is set in the market.
GOLDFARB: If one credit agency lowers down - lowers the rate, it may not have a big effect. But if that starts a chain reaction, it could have a big effect. So you don't want to start disturbing with - the credit rating of the United States.
GOLDFARB: You don't know exactly what would happen. It's unprecedented.
INSKEEP: He's a reporter with the Washington Post.
(SOUNDBITE OF MUSIC)
INSKEEP: This is NPR News.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.