Washington, D.C.– The Bipartisan Policy Center today updated its debt limit projections, which now show that absent congressional action, the Treasury Department will no longer be able to pay all of its bills in full and on time at some point in October or November this year. This is the updated range for what BPC calls the debt limit “X Date.”
The suspension of the federal debt limit expires on March 16, 2017, resetting the limit at around $20 trillion. At that time, the Treasury’s outstanding debt will be up against the limit, forcing the Treasury secretary to take so-called “extraordinary measures” in order to avoid missing or delaying federal payments. Once those measures are exhausted, the Treasury would only be able to pay its bills using the cash in its bank account and incoming tax receipts.
The “X Date” would be reached at the point those funds prove insufficient and Treasury would be forced to default on some of its obligations. Unless legislative action resolves the approaching “X Date,” the costs to the American taxpayer will accumulate even in the weeks and months leading up to this time frame.
The possibility of major fiscal policy changes this year and heightened volatility around tax revenues mean that any projections have a higher level of uncertainty this time around.
“The possibility of major fiscal policy changes this year and heightened volatility around tax revenues mean that any projections have a higher level of uncertainty this time around. But the fact is that this date will be reached if no action is taken by policymakers,” Shai Akabas, BPC fiscal policy director, said.
One particular danger point is the large payments owed to government trust funds that typically fall on the first business day of the new fiscal year – October 2 in 2017.
“Policymakers should address the debt limit well in advance of the ‘X-Date’ range if they want to guarantee that the Treasury can continue to pay all of its bills in full and on time,” Akabas said. “Such action would also minimize the risks and costs to taxpayers that grow by the day.”
As always, BPC’s projections are based on historic data and current policies, and are subject to change based on economic and policy developments. We will update these projections when appropriate.
Shai Akabas is available for comment.
Other Resources: The Debt Limit Explained