On March 15, the debt limit will be reimposed. The Treasury only has $34 billion cash on hand. The government will receive a lot of tax revenues in April and is slowing down paying the tax credits. Still, it may be out of cash by the end of May. (I previously speculated September 1). The exact day doesn't really matter, but it will probably be sometime between June 1 and Sept 30.
Trump may be able to negotiate a deal by then. When Obama had the same type of crisis in 2011, 2013, and 2015, he and Jack Lew stared down the Republicans and insisted that the Treasury was unable to prioritize payments and if it missed a single accounts payable deadline it would be in default. McConnell caved and this lead to a deal which will soon expire.
I think Trump is more devious than that. I think he will order that payments be prioritized so that payments for interest, Social Security, and the military, and other programs he likes will be paid, and programs he doesn't like, such as the EPA, won't. He will force a downsizing of the federal government whether anyone likes it or not. All hell will break loose, and this will end up in the Supreme Court.
Ironically, this will cause the stock market to boom, for the simple reason that cash has to go somewhere, and the government issuing bonds soaks up some of the cash.
The outcome? Who knows. But it could include riots in the streets and the national guard.
Two questions: will this cause a recession? I don't think so, at least not in the short run. The government is usually seen as a counterweight to recessionary forces, but it can also damper the "animal spirits". Unemployment is at a 30 or 40 year low, and the only signs of a recession are reduced government revenues and in retailers.
And is this good for the long-term fiscal stability of the country? Ironically yes. The biggest threat to the long-term stability is the debt, or more specifically the interest on the debt. Anything that stops the debt from growing is good. So bring it on.
I don't think very many people are aware of the constitutional crisis that will occur this summer. Well David Stockman has been yelling, but not many people are listening.
So, when the blockbuster hit comes out this summer, grab some popcorn and watch the world explode.
Read this: https://dailyreckoning.com/fiscal-horror-show-playing-soon-washington/