That big infusion of cash that Congress approved last year to shape up the beleaguered IRS is having an unexpected side benefit.

The funding increase has helped the agency to catch up on processing new and backlogged tax returns. And that, in turn, has allowed federal bean-counters to give policymakers a more precise picture of when the Treasury could run out of money — the so-called X-date — if the government isn’t able to take on more debt.

The nation is stepping uncomfortably close to an unprecedented default that could have catastrophic effects on the global economy because it is bumping up against its legal limit for borrowing. Congress and the White House have been unable to agree on a plan to lift or suspend the borrowing limit. The debt covers the gap between revenues collected by the government and the programs, projects and services it provides.

In the meantime, the Treasury is using “extraordinary measures” to keep the U.S. from running out of cash. The X-date arrives when Treasury has exhausted those accounting workarounds.

Nina Olson, a former head of the Office of the Taxpayer Advocate, said the latest X-date calculation, provided through IRS data, offers a contrast to how underfunded the agency was in previous years.

During the pandemic, the IRS was so backlogged that it was still processing 2020 returns at the start of 2022.

“They have a better picture of what receipts will be,” Olson said. IRS and Treasury spokespeople declined to comment.

Treasury Secretary Janet Yellen informed Congress this week that the U.S. could default on its debt as early as June 1, if lawmakers do not raise or suspend the nation’s borrowing authority. That same day, the Congressional Budget Office reported that it, too, was able to zero in on a more accurate X-date because the IRS is “processing tax returns more rapidly than it did last year.”

Tax and policy experts say the up-to-date IRS data is invaluable to understanding the nation’s financial position as the debate over whether to raise the debt ceiling drags on.

“That, in combination with less-than-expected receipts through April, means that the Treasury’s extraordinary measures will be exhausted sooner than we previously projected,” CBO Director Phil Swagel said in his report.

The X-date is typically not a specific date — it’s a time range. That’s because it reflects not just the money coming into the government, but the cash that goes out. Even if the government has a better sense of tax revenues, it could have to reimburse a state government, pay a contractor or face expenses that make the X-date a moving target.

Natasha Sarin, a Yale Law School professor who previously worked as a counselor for Yellen on IRS issues, said the latest tax data reveals the “tremendous uncertainty that exists in determining the precise X-date.”

The CBO, Moody’s Analytics and the private Bipartisan Policy Center all try to calculate the time frame for potential default using data on government cash flows and changes in debt. But even their leaders say that no one knows exactly when the X-date could arrive.

That depends on the billions of dollars flowing in and out of federal coffers all the time.

Mark Zandi, chief economist of Moody’s Analytics, said Thursday at a Senate Budget Committee hearing that he estimates the X-date to fall around June 8.

The closer the nation gets to potential default, the more perilous the nation’s financial standing and the more accurate X-date forecasts become, economists say. President Joe Biden has invited the top four congressional leaders to the White House on Tuesday for talks — signaling the growing fears of a default.

Daleep Singh, who served as deputy national security adviser earlier in the Biden administration, said the new tax data gives credibility to Treasury’s most recent assessment of the projected default date.

He called the debt ceiling brinkmanship a national security issue, especially as the U.S. government’s relationship becomes more strained with China, as a major creditor holding U.S. debt.

“This is a matter affecting our financial stability,” he said. ”If we commit an unforced error, we’re handing a gift to our adversaries.”

Consumers who recently filed tax returns with TurboTax but were eligible for the Internal Revenue Service’s Free File program will soon start receiving checks as part of a multistate settlement with TurboTax’s parent company, Intuit.

According to a press release Thursday from the Pennsylvania attorney general’s office, eligible customers include those who paid to file federal income tax returns through TurboTax for the tax years 2016, 2017 and 2018.

The $141 million settlement, announced a year ago, came in the wake of a 2019 ProPublica report that showed Intuit had steered low-income taxpayers toward its fee-based products after promising them access to no-cost tax filing services — in part by using advertisements that promised ‘free, free, free’ filings.

“Frequently ‘free’ didn’t mean free at all,” ProPublica reported. “Many who started in TurboTax Free Edition found that if their return required certain commonplace tax forms, they would have to upgrade to a paid edition in order to file.”

Per the terms of the settlement, eligible customers will receive a check in the mail automatically, without having to file a claim. Most are expected to receive between $29 and $30, the press release said.

“By requiring consumers to pay for tax-return services that should have been available for free, Intuit cheated taxpayers out of their hard earned money,” Pennsylvania Attorney General Michelle Henry said in a statement.

“Intuit’s deceptive practices and aggressive advertising campaign were unnecessary and illegal; especially when the IRS offers free tax-return services for eligible consumers.”

You can find more information on the settlement program here.

Job growth fared better than expected in April despite bank turmoil and a decelerating economy, the Labor Department reported Friday.

Nonfarm payrolls increased 253,000 for the month, beating Wall Street estimates of 180,000, according to the Bureau of Labor Statistics.

The unemployment rate was 3.4%, against an estimate of 3.6%, and tied for the lowest level since 1969. A more encompassing number that includes discouraged workers and those holding part-time jobs for economic reasons edged lower to 6.6%.

Average hourly earnings, a key inflation barometer, rose 0.5% for the month, more than the 0.3% estimate. On an annual basis, wages increased 4.4%, higher than the expectation for a 4.2% gain.

Stock market futures held their gains following the report, while Treasury yields were sharply higher.

Professional and business services led the job gains with an increase of 43,000. That was followed by health care (40,000), leisure and hospitality (31,000), and social assistance (25,000).

Despite serious banking industry troubles, jobs in finance increased by 23,000. Government hiring rose by 23,000.

April’s upside surprise was offset by sharp downward revisions in previous months. March’s count was slashed to 165,000, down 71,000 from the initial estimate, while February fell to 248,000, a reduction of 78,000. Also, the household survey, which is used to calculate the unemployment rate, showed a softer total jobs gain of 139,000.

“It is encouraging to see a strong jobs report amid recession concerns, instability in the banking sector and ongoing layoffs,” said Steve Rick, chief economist at CUNA Mutual Group. “We are hopeful the continued strength of the jobs market and signs of slowing inflation will ease market volatility in the coming months.”

Friday’s report comes amid persistent troubles in the banking industry, particular midsize regional institutions that have been hit by runs on deposits and worried investors who have sent share prices tumbling.

That has come at the same time that the economy appears to be slowing toward a possible recession later in the year. Gross domestic product increased just 1.1% in the first quarter, largely on an inventory drawdown though there have been signs that consumer spending is weakening. Credit card spending, for instance, has declined 0.7% from a year ago, according to Bank of America.

Despite the bank troubles and recession fears, the Federal Reserve this week raised its benchmark interest rate another quarter percentage point, taking it to its highest level since August 2007.

Fed Chairman Jerome Powell acknowledged that higher interest rates were pressuring households, though he noted that the labor market has remained strong. He added that the economy “is likely to face further headwinds from tighter credit conditions.”

The central bank is striving to get inflation down to a 2% annual level, though it is well above that now. One measure, the consumer price index, shows inflation running at a 5% annual pace.

Rising wages have helped pressure prices. Powell said a 3% annual wage gain is probably consistent with the Fed’s 2% mandate.

Congress and the White House barrel toward a June 1 deadline to resolve a debate over the debt ceiling, putting the credit and trust of the United States on the line.

Treasury Secretary Janet Yellen has said that failing to lift or suspend the debt ceiling would lead to “economic and financial catastrophe,” darkening a U.S. economic outlook already clouded by elevated inflation, high interest rates and unease in the banking industry.

The Congressional Budget Office and the Treasury Department projected May 3 that if the government doesn’t pay its bills for even a week, 500,000 Americans would lose their jobs as the economy contracts by 0.6%.

What’s the worst-case scenario?

A “protracted” default, lasting longer than three months, would trigger a Great Recession type of scenario in which as many as 8.3 million people could lose their jobs. In that situation, the stock market could fall by 45%, hurting the accounts of those saving for retirement.

Those still working would be squeezed by even higher interest rates. Mortgage rates, for example, might rise further after already spiking from about 3% in December 2021 to 6.4% this month.

Economists say those scenarios loom over a U.S. already at risk of recession. Deutsche Bank projects a recession to begin at the end of this year as a result of the Federal Reserve’s efforts to raise interest rates and deliberately slow an economy plagued by high inflation.

Despite unemployment sitting at a historic low of 3.4%, high inflation is outpacing wage gains. Americans have had to tap into their savings to make ends meet. Households saved a total of $1.6 trillion before the pandemic, but now sit on $1 trillion in savings.

Credit card rates, at almost 24%, according to LendingTree, loom over $986 billion in credit card balances, surpassing the pre-pandemic high by $59 billion.

In addition to high borrowing costs and concerns that the job market will reverse course soon, The Conference Board’s measure of consumer expectations is at levels “associated with a recession within the next year.”

‘A major problem’

A debt ceiling debacle would only worsen that outlook, economists say.

“If you did ride over this cliff and the government were to technically default, that would be a major problem. It would cause a global crisis,” Deutsche Bank U.S. senior economist Brett Ryan said of a potential default.

The debt ceiling is a legal limit on how much debt the U.S. Treasury is allowed to issue. The government breached that limit on Jan. 19, after which it scrambled to find cash elsewhere to keep the lights on. The Treasury Department estimates it will exhaust those “extraordinary measures” as early as June 1 — a date that could change depending on difficult to predict factors like tax payments from last month’s filing deadline.

After June 1, the government would be at risk of defaulting — or missing payments on its debt. 

“We’d be in uncharted territory, and the consequences to the U.S. economy would be highly uncertain and could be quite averse,” the nation’s top economic policymaker, Federal Reserve Chairman Jerome Powell, said May 4.

Failing to pay the bills would erode trust in U.S. government debt, seen up to date as largely “risk-free” due to the nation’s track record of paying its debts on time and in full. A default could lead to a dramatic decline in the value of U.S. government bills, notes and bonds (thus raising the “yield” that their coupons pay out as a percentage of their value).

How important is that yield?

Nearly every corner of the finance world relies on U.S. government yields as a benchmark. Investors at home and abroad closely watch yields when trading securities.

Mortgage lenders look at U.S. Treasuries when deciding what rates to charge you when buying a home. Third Way estimates that a default could add $130,000 to the cost of an average 30-year mortgage.

The U.S. may not even have to technically default to realize some of these effects. In 2011, credit ratings agency S&P downgraded the nation’s prized AAA rating because of the “political brinksmanship” of its debt ceiling deliberations. The downgrade, which was never reversed, raised government borrowing costs by an estimated $1.3 billion.

There are particular corners of the U.S. financial system at risk now, which would make any negative debt ceiling outcome particularly pronounced in 2023. Spiking government bond yields could worsen the picture for commercial real estate, where telework arrangements have squeezed landlords saddled with debt at rising interest rates.

Banking worries add to the pressure

The failures of three top 30 U.S. banks in the past two months add to the risks. The collapse of First Republic Bank on May 1 revived concerns about the ability of regional banks to survive higher interest rates, a conundrum that could worsen if a debt limit standoff further pushes U.S. government yields higher, in turn further raising interest rates.

Moreover, economists worry that the political air may not be there to quickly respond to any acceleration of the banking system issues, if needed.

“Complicating any future debate over a government rescue is a threatened standoff over the debt ceiling,” wrote Wells Fargo Investment Institute strategists Gary Schlossberg and Jennifer Timmerman on April 25. 

And so do the politics

Goldman Sachs Economics noted May 1 that the GOP is also factoring in the 2024 election into any debt ceiling strategy, as it “presents the best opportunity for congressional Republicans to wrest any policy concessions from the President.”

Although it is a mechanism to cap government borrowing, the debt ceiling does not cap spending. The federal budget process, separate from the debt ceiling, determines how much money the government spends — and where it is spent. Still, House Speaker Kevin McCarthy and President Joe Biden continue to be at odds over how to tie the two together. 

McCarthy is attempting to couple an increase on the borrowing limit with spending cuts, but Senate Democrats and the White House are standing resolute on a “clean” bill that would raise the debt ceiling — while leaving debates on spending to the separate, annual budget process.

Despite the impasse, history is on the side of resolution. Since 1960, Congress has moved 78 separate times to raise or extend the debt limit. 

Deutsche Bank’s Brett Ryan said he expects Congress to pass a short-term extension that would punt the debt ceiling debate to the end of September, when the economy may already be weak.

“It only adds to recession probabilities,” Ryan said.

Warren Buffett, chairman and CEO of Berkshire Hathaway, praised the government’s intervention in recent bank failures, saying on Saturday it averted what could have become an even bigger crisis.

Yet he said the U.S. banking system had become overly complicated — and that he was not surprised that the banks had failed. He said he’d been selling bank stocks, first at the start of the pandemic and more recently over the past six months as banks increasingly face mismanagement and respond to bad incentives.

‘The American public doesn’t understand their banking system — and some people in Congress don’t understand it anymore than I understand it,’ Buffett said.

Speaking during the company’s annual shareholders meeting in Omaha, Nebraska, about the failure of Silicon Valley Bank, Buffett said he thought the government did the right thing in stepping in to guarantee bank deposits above the Federal Deposit Insurance Corporation guarantee of $250,000.

“It would have been catastrophic,” Buffett said of a situation in which the government didn’t act. He added that refusing to guarantee all SVB deposits risked a “run on every bank in the country” and, by extension, a threat to the global financial system.

Berkshire Hathaway, the Omaha-based conglomerate that owns and invests in companies ranging from Dairy Queen to Geico, has substantial investments in the largest banks in the country. As of the end of 2022, Buffett’s investments included a 13% stake in Bank of America, 3.2% stake in Bank of New York Mellon, 2.8% stake in Citigroup and 0.5% stake in U.S. Bancorp.

The banking industry has been rattled by higher interest rates, which squeezed banks unprepared for the sharp drop in the value of its interest rate-sensitive assets.

Buffett said he was worried about how easy bank runs had become.

‘If people think deposits aren’t sticky anymore, you’re living in a different era,’ he said, adding technology has made it so that ‘you could have a run in a few seconds.’

A new poll from Gallup found that nearly half of Americans say they are now worried about the safety of their deposits, the highest share since the global financial crisis of 2008.

Yet even as he worried about the ease with which additional bank runs could occur — and recounted how his father lost his job in 1931 as the result of a bank run — Buffett said the U.S. government actions should have demonstrated that concerns about deposit safety were unfounded.

“Here we are in 2023, and we actually see the FDIC pay off 100 cents on the dollar to everybody, or making it available to all demand deposits,” Buffett said.

The banking crisis episode has led to heightened scrutiny on the commercial real estate sector, where telework arrangements and soaring borrowing costs are raising concerns about banks that lend to the sector.

“The hollowing out of the downtowns in the United States and elsewhere in the world is going to be quite significant and quite unpleasant,” said Berkshire Vice Chairman Charlie Munger, who added that Berkshire itself is not actively exposed to commercial real estate.

Inflation and the dollar

Buffett praised Federal Reserve Chairman Jay Powell, saying no one understood the current economic environment better than him.

But he also warned that there was a limit to how much control the Fed had, and worried about having let ‘the genie out of the bottle’ when it came to price growth and money printing eroding faith in the U.S. dollar.

‘We are not as well off in relation to curbing inflation expectations — which become self fulfilling — we are not as well off as we were earlier,’ Buffett said.

Yet even as Buffett acknowledged uncertainty about the course of the erosion of purchasing power, he rejected the idea that the U.S. dollar was in danger of losing its global-reserve status.

‘I see no option for any other currency to be the reserve currency,’ Buffett said.

The debt ceiling

Buffett also spoke briefly on the debt limit, noting that he could not imagine the U.S. government allowing “the debt ceiling to cause the world to go into turmoil.”

Congress and the White House are barreling toward a June 1 deadline to raise the limit on how much the U.S. Treasury is allowed to borrow, with the “economic and financial catastrophe” of a government default on the line.

Nonetheless, Buffett expressed broad worry about the trajectory of U.S. politics.

“Partisanship, it seems to be, has moved toward tribalism, and tribalism just doesn’t work as well.”

Concerns about AI

The nonagenarians also fielded questions on the application of artificial intelligence on investing — and the world at large.

As Wall Street weighs the use of tech like ChatGPT in forecasting stock prices, Buffett said “the tech doesn’t make any difference” in finding investable opportunities.

Buffett, whose reputation for stock picking built Berkshire, added that “what gives you opportunities is other people doing dumb things.”

Broadly, Buffett expressed concern that society can’t “un-invent” technology that changes the future, but adamantly said humans remain in the driver’s seat.

“With AI, it can change everything in the world except how men think and behave,” Buffett said, loosely quoting Albert Einstein’s commentary on the invention of the atom bomb. Munger quipped that “old fashioned intelligence works pretty well.”

The Oracle of Omaha

Known as the Oracle of Omaha, Buffett currently ranks fifth on Forbes’ billionaires list, with a net worth of about $105 billion.

Throughout his decades in business, Buffett has earned a reputation as one of the smartest investors alive — all while maintaining a relatively frugal lifestyle (he still lives in the house he purchased in 1958, and regularly eats McDonald’s).

Buffett’s strategy is broadly defined as value investing; buying low and only selling when absolutely necessary. Buffett advises holding onto good investments for decades at a time, while ignoring most short-term market movements.

Instead of frequently checking a stock’s price, Buffett said, “you’d look to the earnings and dividends over the years as determining whether you made a good investment or not. And that’s what people should do with stocks.”

‘Woodstock for capitalists’

The annual Berkshire shareholders meeting, dubbed by Buffett and fans as the ‘Woodstock for Capitalists,’ has seen as many as 40,000 attendees pile into the largest convention center in Omaha, Nebraska. It will be the 59th time Buffett has presided over Berkshire’s annual shareholder meeting.

The gathering has also become known for its marathon Q&A session: Buffett, 92, and Berkshire Vice Chairman Charlie Munger, 99, are slated to take questions from attendees for at least five hours on Saturday.

Like most investors, Berkshire is coming off a down year, at least on paper: It reported an annual loss of $22.8 billion for 2022. But in his most recent annual letter to shareholders — the release of which is itself a seminal event on investors’ calendars — Buffett called that figure “100% misleading” because it includes losses on stock holdings whose “quarter-by-quarter gyrations, regularly and mindlessly headlined by media, totally misinform investors.”  

Instead, Buffett said, investors should look at the operating earnings of Berkshire’s wide-ranging portfolio of companies, which as of year-end included American Express, Bank of America, Coca-Cola, Occidental Petroleum and Paramount Global. On that basis, Berkshire ‘set a record at $30.8 billion,’ Buffett said.

What’s more, Buffett calculated that the rate of return to Berkshire shareholders over its 58 years of existence has been 3,787,464%. He attributed this success to continuous savings, ‘the power of compounding,’ avoiding ‘major’ mistakes, and what he called ‘the American Tailwind.’

‘America would have done fine without Berkshire,’ Buffett wrote. ‘The reverse is not true.’

Berkshire on Saturday reported a 12.6% increase in operating earnings between March 31 and the same time last year. But Buffett said a slowdown in the economy would likely lead to a “majority of our businesses” reporting lower earnings this year than last year.