Quirky Federal Spending Speeds Up Debt-Ceiling Clash
Falling US income tax revenue is the main reason the default showdown has come sooner than expected, but outlays are up, too, for some interesting reasons.
The increase in outlays is a mix of the seemingly inexorable, the possibly temporary and the probably reversible.
Photographer: Chip Somodevilla/Getty Images
A bigger-than-anticipated federal deficit has pushed up the deadline for dealing with the US debt ceiling from sometime in the third quarter to any day now. The deficit is bigger than expected because, after rising sharply in 2021 and the first half of 2022, federal receipts have plummeted lately and, after falling even more sharply over that period, outlays have resumed rising.
What happened to receipts is no mystery. The main driver of both their rise and fall was the individual income tax and the way its progressive structure (higher incomes pay at higher rates) interacts with a boom and bust in asset prices — a topic I explored in depth a few weeks ago and will confine here to this chart.