Washington, D.C.– The Congressional Budget Office narrowed its debt limit projection to early- to mid-October for when the federal government will run out of sufficient cash to pay its bills in full and on time. That time period is largely in line with the Bipartisan Policy Center’s projection of October to November 2017.
The federal government is currently operating at the debt limit, and the Treasury Department is using extraordinary measures to raise the cash necessary to pay its bills. On the day those measures and Treasury’s cash on hand run out, known as the “X Date,” the federal government risks defaulting on its obligations.
CBO also substantially changed its projections for revenues, spending, and deficits for the year. Its updated outlook describes an ongoing trend of lower-than-expected revenues, possibly due to individuals shifting capital gains to later years in anticipation that tax reform could lower tax rates on those gains. Overall, CBO lowered its 2017 revenue projections by $89 billion, and projected an annual deficit of $693 billion, which was $134 billion higher than its previous projection.
Daily volatility in federal spending and revenues makes it impossible to predict the exact “X Date.” Certain days of large scheduled payments, however, are more likely to deplete the Treasury’s cash reserves. Both CBO and BPC have highlighted October 2 as a particularly risky day within their wider projections due to a large payment to the military retirement trust fund.
“Current projections that the ‘X Date’ will be hit sometime in the fall should not lead to a false sense of security. There is always a risk the ‘X Date’ could occur earlier than projected, with serious financial consequences,” Shai Akabas, BPC’s director of fiscal policy, said.
Current projections that the ‘X Date’ will be hit sometime in the fall should not lead to a false sense of security.
“CBO’s October projection could mean that Congress will be considering the debt limit as the current fiscal year is ending, running up against other budget deadlines,” Akabas said.
BPC will analyze June data and consider whether an update to its “X Date” projection is required. Any update would be issued in mid-July.
BPC’s newly released “Myths and Facts” answers some key questions about how the debt limit works, its history, and the costs associated with operating at the debt limit.