Weak tax revenue numbers are amplifying debt ceiling concerns

The White House and the Congressional Leader's offices are still trying to hammer out any potential areas of agreement. There needs to be a meeting early next week before President Biden leaves for Asia on Wednesday if there is going to be any sort of agreement that can move forward in a timely manner before that June 1 default deadline. So far Republicans have put forth four buckets, permitting reform, work requirements for people receiving Medicaid and food stamp benefits, clawing back some of the COVID aid and then pursuing a deal to cap government spending for multiple years. I'm told permitting reform and those spending caps are two of the lowest hanging fruit for these negotiations. But of course the devil Kelly is always in the details and there's a lot of details there that need to be worked out. All of this while the Congressional Budget Office is saying yes early June is when the U.S.

would in fact default that if Treasury has to pay more than $300 billion in bills that it won't be able to do it with the cash it has on hand and it might not be able to make it to June 15 when more tax revenue comes in. What by the way did CBO say today because I saw it seems like they're in the basket of we could still hit in the first weeks of June we missed that point maybe we you know can hold out a little bit longer and I also thought it was interesting what they said about the deficit and the debt I mean that's why we're in this situation to some extent in the first place. Right well it's sort of like a household budget Kelly if you could pay your water bill and your electric bill but not pay your mortgage not pay the bigger ticket item and conserve some of that cash then maybe you could stumble along and make it work. But Treasury has never been in this position and they're extremely conservative about how to do this and there are certainly a lot of payments coming due to social security payments veterans benefits federal salaries tens of billions of dollars that they'll need to pay and June 15 is when the tax revenue comes in CBO says if Treasury can make it to June 15 then based on how much cash comes in from some of those tax receipts maybe it could make it to late July without a default but there's of course a lot of ifs in there and a lot of conditions on you know what exactly Treasury decides that it can and must pay and you know what actually ends up coming in on June 15. Right exactly Ben let me turn to you on that so we obviously see investors pricing in a pretty high out of default and as of default what's interesting about that is that there's no reaction in the stock market some extent reaction in the bond market but the fact that the credit default swaps are now higher than we saw in 2011 without market impact is striking. It is striking and it does show you that there are those in the market who understand that this particular debt limit standoff is much more complicated and difficult than the last couple since 2011 when we got downgraded by standard and pours and that was the first time in our history and we got close to a default the contours are there for that to happen again given all that Taylor just said about the timing and getting to June 1 versus June 15 and the tax receipts so the risk is the tax receipts have been worse than expected they were terrible in April they were like 200 billion dollars precisely May has been kind of soft so that's kind of pushing us closer right we're not getting better news on that front so if anything the the deadline gets pushed forward a little bit I still believe that there is a deal to be had here that will include some give back of the COVID money that hasn't been spent permitting reform and then a hike of the debt limit because I think Republicans know that Kevin McCarty the outspeaker needs to keep a speakership by getting something through the Republicans can support but they know the polls they know every time this happens they get hammered for it and they get blamed for it and there's new polling out today suggesting the public would blame Republicans but it's odd because it's sort of like there's two aspects of this and it's there's who do you blame in a debt ceiling fight but also what do you want to be done about spending and deficits and so a lot of people say well I want us to rein things and I want austerity and that's where it feels like and this is the point Dan Clifton keeps making but all of this is really about in 2011 when Obama raised the debt ceiling he had to concede to significant austerity and if we have to concede to any austerity now it's at a pretty bad time for the economy exactly we can't really afford austerity cuts right now or big discretionary spending limits and what was in the original republican plan are pretty drastic cuts in discretionary spending if you take out the military which they said they would economy can't really afford that Republicans know that that's not going to happen there is a deal here Kelly it just needs to be made and it's actually not a bad sign that they're not meeting today that means staff is talking and there are details to be worked out get the principles together next week before Biden leaves and hopefully save our summer that we don't have to be you know driving to the beach and worrying about this in July because I don't want to be well that said kail I thought the president Trump's comments were quite interesting where he took a really hard line on the debt ceiling issue the other night said he thinks Republicans should put push for huge spending cuts and if that's any indication of where some of the public is on this then perhaps we should be prepared for a bigger fight yeah and he also said that the country should just go ahead and default and see what happens leaving some like Jamie Diamond the CEO of JPMorgan Chase to call it irresponsible and say that's why you know he doesn't trust him on matters like this look I mean Kelly I think that there are real questions as to what the path forward is and how long these spending cuts can agreed upon be agreed upon because on one hand you know there seems to be some rumblings that maybe two years is a time frame that the administration would try to push for but just yesterday some Republicans on the hill have said well if it's only two years that we're capping spending then we need to get a lot in return for that the cost that we're going to exact the price that we're going to exact is going to be really high for only two years I mean they want the curve of government spending to essentially be redirected downward which is a really big change from recent trends so you know the question of how long the term is for any sort of spending cap deals still remains to be seen and you know some Republicans have suggested that maybe default is a good thing at least that's their public posturing because they want to show the administration that they're not worried about it but I think behind the scenes they know that you know it would be a bridge too far.

cnbc, business, news, finance, investing, the exchange, stocks, economy, politics, breaking news, money, Wall Street, kelly evans, newsroom