Jan. 7, 2013
Washington, D.C. - An analysis released today by the Bipartisan Policy Center (BPC) confirms that the federal government will be unable to meet all of its spending obligations as early as mid-February unless the debt ceiling is raised. Click here to read the analysis.
“Based on financial data from Treasury, we estimate that the government will be unable to pay all of its bills as early as February 15, also known as the X Date” said Steve Bell, Senior Director of the Economic Policy Project at BPC. “Our numbers show that we have less time to solve this problem than many realize. We estimate that Treasury will exhaust its borrowing authority and no longer have sufficient funds to meet its obligations in full and on time at some point between February 15 and March 1. It will be difficult for Treasury to get beyond the March 1 date in our judgment.”
In November, BPC predicted that the U.S. would hit its debt limit before the end of 2012, which it did on December 31, 2012. At that time, the U.S. began tapping into approximately $201 billion of extraordinary measures to allow for an extended period of fully-funded government operations.
Using daily and monthly statements from the Department of Treasury, historical financial data and Congressional Budget Office (CBO) estimates of revenue and spending growth, BPC projects that the U.S. government would have a substantial negative operating cash flow of $175 billion between February 15, 2013 and March 15, 2013. $452 billion in scheduled payments are due in that period - including big ticket items like Internal Revenue Service (IRS) tax refunds for individuals, Medicare, Medicaid and Social Security payments, and interest payments on the debt - while projected revenue totals only $277 billion during that same period.
“If we reach the X Date and Treasury is forced to prioritize payments, handling payments for many important and popular programs will quickly become impossible, causing disruption to an already fragile economic recovery,” said Bell.
In addition to prioritization of payments, Treasury must also roll over roughly $500 billion in debt that matures in the February 15-March 15 period. Finally, BPC predicts that a debt limit increase of $1.1 trillion would be needed to fully fund the government through the end of 2013 and another $1 trillion through the end of 2014.
Click here to read BPC’s full analysis and to learn more about BPC’s methodology.
Economic Policy Project