Government Faces Potential Default

The US government faces potential default on loans in September due to lower tax revenue than expected.

Lower than expected tax revenue means there is significant risk that the government will default on debts in the early part of September, according to Business Insider. The news comes from Bipartisan Policy Center, a Washington think tank.

Tax revenues have been weaker than anticipated, growing by 2% to 3% instead of the anticipated 5% to 6%. The government has been in talks to establish a budget and raise the debt cap. The $22 trillion debt cap needs to be raised or the government won’t be able to pay its bills.

The Congressional Budget Office also posted on Monday that the budget deficit is $746 billion for the first 9 months of fiscal year 2019. Revenues were $69 billion higher and federal spending was $208 billion higher over the period. Defaulting by the government could scare investors and increase borrowing costs for the government as well as individuals.

Talks to raise the cap started last month on a strong note, but later floundered. House Speaker Nancy Pelosi (D-Calif) and Senate Majority Leader Mitch McConnell (R-Ky) promised to not let the government default, but no agreement has been made still and they have just 3 weeks to come to a decision before Congress breaks for a six-week summer vacation.

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