The federal debt limit has historically been a partisan issue, but it has metastasized in recent years alongside the increasing polarization of our entire legislative process. Since 2011, BPC has offered independent analysis to help inform policymakers and the public about the debt limit, as well as provide a nuanced and unbiased perspective to cut through partisan talking points.
In this past, some have misinterpreted the window we present as a safe range to forestall default. This interpretation, however, is a misreading of BPC’s analysis. BPC’s view has always been that policymakers must act before the beginning of the X Date range—ideally well before—if they wish to responsibly protect the U.S. and global economies. The ramifications of any missed payments could be severe, and even approaching the X Date has negative economic consequences. As we explain below, the risks of default increase every day starting at the front end of our projected range. Accordingly, venturing even one day into our projected range invites serious economic risk.
Projecting the X Date
Rather than predicting a specific day when the U.S. is most likely to begin missing payments, BPC releases a range during which we are fairly confident that will occur. We take this approach for two reasons. First, all estimates of the X Date are subject to significant uncertainty. We are attempting to assess millions of payments flowing in and out of the federal government on a daily basis. From basic statistics, our range is similar to a confidence interval that incorporates uncertainty—in contrast to a projection of a specific day, which does not.
Second, given the grave consequences that could ensue if the nation crosses the X Date, it is helpful for policymakers to grasp the earliest that the X Date is likely to occur and understand there are risks even leading up to that date. While the probability that the X Date will fall on the first day of our range is small (just as it is that it will not arrive until the last day), lawmakers play with fire if they fail to address the debt limit before the beginning of the X Date range. As the graph below illustrates, the cumulative probability of the X Date occurring increases over the course of the range. This means that as we progress through the X Date range, the likelihood of the X Date occurring rises.
Policymakers should not interpret BPC’s projections to suggest that they can delay action on the debt limit until the beginning of the X-Date range without consequence: History has taught us time and time again that real costs and risks to debt limit brinkmanship begin appearing in the weeks and months prior. For example, leading up to the October 14, 2021, debt limit increase, interest rates on short-term Treasury securities that mature near BPC’s X Date range rose markedly, demonstrating a degree of concern in the market. Ultimately, it is American taxpayers who will be on the hook for these increased borrowing costs.
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