WASHINGTON – A bipartisan think tank expects the United States will default on its debt in the summer or early fall if Congress doesn’t take steps to address the debt limit before then.
The timeline is similar to one released by the nonpartisan Congressional Budget Office last week, which said lawmakers have until July and September to raise or suspend the debt limit before the US hits the so-called X date.
Treasury Secretary Janet Yellen said the country has until at least early June.
“Today’s X Date range reflects, in part, the considerable uncertainty in our nation’s current economic outlook,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. “Policymakers now have an opportunity to inject certainty into the United States and the global economy by initiating serious bipartisan negotiations about our nation’s fiscal health and acting to bolster U.S. full confidence and credit well ahead of the X Date “.
President Joe Biden and President Kevin McCarthy, a California Republican, have entered preliminary talks on the debt limit and government spending, but Biden remains adamant that negotiations on whether and how to reduce federal spending should be on one track separate from the debt limit talks.
McCarthy said the two should be tied together and that it makes no sense to increase the borrowing capacity of the nation, which pays for laws already passed by Congress, without addressing future spending.
The BPC projection found that the default date, when the country will no longer be able to pay all its bills in full and on time, “will heavily depend on 2022 tax collections in a fragile post-pandemic economy with low unemployment.” , persistent inflation and fears of recession”.
“Indeed, if tax season revenues are far below expectations, there may even be a ‘too close for comfort’ situation ahead of quarterly tax revenues due on June 15,” the projection says.
Congress took three bipartisan votes during the Trump administration to suspend the debt limit and took one mostly partisan vote to raise the debt limit during the Biden presidency.
That $2.5 trillion boost petered out in January, after which the Treasury Department began using accounting maneuvers called extraordinary measures to keep the country below the $31.4 trillion borrowing limit.
The US has never passed its default date, or X-date, so there is uncertainty as to exactly what would happen, but the federal government would be locked out of deficit spending.
That would mean steep cuts to government programs, though it’s not clear whether the Treasury secretary would be able to determine which programs receive funding and which don’t.
Even if spending cuts could be prioritized by default, there are likely to be large impacts on the global economy, as well as health care programs, defense and the federal workforce.
The Bipartisan Policy Center said in its projection that it plans to narrow the default date window as federal revenues and expenditures become clearer.
Akabas said he was “optimistic that today’s screening gives Congress and President Biden a window of opportunity to come together and work out a deal.”
“They owe it to every American worker and small business owner to avoid the costs and risks associated with dragging out to the eleventh hour.”
