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Debt Ceiling Deadline Delayed: Good News and Bad

Bernice Napach
Daily Ticker
Debt Ceiling Deadline Delayed: Good News and Bad

Who would have thought that Fannie Mae (FNMA), once the recipient of $116 billion in government bailout funds, would one day be the reason the government could delay its debt ceiling deadline by almost four months?

U.S. Treasury Secretary Jack Lew told CNBC Friday that a one-time payment of $59.4 billion from Fannie Mae pushes back the debt ceiling deadline effectively from May 19 “until at least Labor Day,” which falls on September 2.

Goldman Sachs and other Wall Street firms also expect the government won’t run out of spending money until this fall.

Related: Next 5 Months Are Critical for Budget Reform: Maya MacGuineas

“The good news is things actually are a getting better on the deficit,” says The Daily Ticker’s Henry Blodget. “ Everyone hates the sequester but it went in [effect]…the lines are closing…the deficit will be smaller.”

The bad news is that Republicans and Democrats still haven’t agreed on a plan to deal with the debt ceiling when it is reached, and this latest development o now relieves them of the pressure to act anytime soon.

In the meantime the Republican-led House Thursday passed a bill that requires the government to pay the owners of Treasury debt and recipients of Social Security before anyone else IF Congress fails to raise the debt ceiling before it’s breached. Supporters of the House bill say it would prevent a default but the Senate is not expected to approve it.

Related: Krugman: Yes We Have to Fix the Deficit Eventually--But Not Now

Republicans and Democrats remain far apart on what to do about the g deficit and the roughly $16.7 trillion worth of government debt. In general Republicans argue that spending is too high and Democrats say revenues are too low. At the moment, though, revenues are coming in higher than expected because the economy, including the housing market, is recovering.

“What a fantastic time to use this good fortune to really revise these tax laws, to really tighten things up and make sure Apple (AAPL) can’t do things like jam $17 billion of debt through as a tax dodge,” Breakout’s Jeff Macke tells The Daily Ticker, referring to Apple's use of debt rather than repatriated cash subject to taxes to finance shareholder payouts. But instead of reforming the tax code, both parties in Congress have decided “to do nothing and blame the other side for it,“ says Macke.

The Daily Ticker Presents: Generation I.O.U.

Yahoo! Finance, Yahoo! News and The Daily Ticker are teaming up to produce a special live streaming event on May 23 at 12:30 pm ET around the rising cost of college.

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