Egan-Jones Says there is more than Enough Operational Cash Flow in US Treasury to Meet Existing Debt Service through Tax Receipts

Egan-Jones Bill Hassiepen says his firm believes the debt ceiling is a red herring. "If Congress chooses to either delay or outright refuse to raise the debt ceiling of the US, it does not automatically translate into a default. We believe that there is more than enough operational cash flow in the Treasury to meet existing debt service through tax receipts (we also expect a significant windfall by Apr 15th due to the high collections of cap gains taxes in Dec '12). That said, the government would have to make some hard choices on what to pay, and who to pay outside servicing the nation's debt. However, only the failure to meet debt service obligations would constitute a default. We are far more concerned that there does not appear to be any plan to tackle the level of debt, deficits that are over 8% of GDP, and the unfunded pension liabilities. So in the end should there be a delay in raising the debt ceiling, we would not anticipate any negative action on our part for the reasons I have outlined." Hassiepen was responding to warnings by Fitch of a US downgrade.