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Debt Limit Analysis

The debt limit, set by law, restricts the total amount of money that the federal government can legally borrow. When the debt limit is reached, the Treasury Department can no longer borrow money to cover government operations. It can temporarily draw on “extraordinary measures”—accounting maneuvers that can allow the government to continue standard operations for a limited period.

Once those extraordinary measures and the Treasury’s cash reserves run out, the federal government would reach the “X Date”—the day on which the U.S. government is unable to meet all its obligations in full and on time. This unprecedented event would likely have catastrophic consequences for financial markets and Americans throughout the country.

On December 16, 2021, President Biden signed legislation that raised the debt limit by $2.5 trillion to approximately $31.4 trillion, resolving the latest debt limit standoff. BPC projects that the federal government will reach its new debt limit sometime during or after the first quarter of 2023 and likely will not reach the X Date until at least the third quarter of 2023.

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For many years, BPC experts have been leading voices in debt limit analysis. Review our previous projections, analyses, and reports.

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