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BPC Forecasts Debt Limit “X Date” in March

Friday, December 1, 2017

Washington, D.C. – After conducting an in-depth analysis of Treasury’s financial statements, BPC forecasts that the debt limit “X Date,” when the federal government will no longer be able to meet its financial obligations in full and on time, will occur sometime in March 2018.

Without congressional action, the debt limit suspension will expire on December 8, and the debt limit will then be reinstated at roughly $20.4 trillion. To avoid defaulting on its obligations, the Treasury Department will once again deploy accounting maneuvers, so-called “extraordinary measures,” to fund government operations. BPC estimates that Treasury will have about $270 billion of these measures. This is significantly less than the approximately $388 billion of measures the federal government had when it last reached the debt limit in March 2017.

“Treasury has a lot less breathing room this time around when it comes to the debt limit,” Shai Akabas, director of economic policy at BPC, said. “Policymakers need to act soon if they intend to avoid a default on our federal government’s obligations.”

Policymakers need to act soon if they intend to avoid a default on our federal government’s obligations. 

BPC’s forecast is similar to the recent projection of the Congressional Budget Office. February weighs heavily on the forecast because that month generally has a negative cash flow of about $220 billion (four-year average).

Major policy changes under consideration—such as tax reform, additional disaster relief, and a possible deal on increasing spending caps—could affect BPC’s projection.

“It is too early to say exactly how a budget deal or tax reform would affect the ‘X Date,’ but they could certainly affect our projection,” Akabas said. “Large spending increases or revenue declines could bring the risk of default even closer.”

Like all economic projections, BPC’s forecast is uncertain and could be affected by changes in the economy or fiscal policy. BPC will update its analysis as new data or policy changes arise.

Shai Akabas and G. William Hoagland, senior vice president, will be available on a media call at 11 a.m. ET today to discuss the new projection. For call-in details please email Toby Zakaria at [email protected].

*UPDATE: This release originally stated that the debt limit would return at “approximately $20.6 trillion.” That figure should have read “approximately $20.4 trillion.”