Washington, DC – The Bipartisan Policy Center currently projects that, absent congressional action, the debt limit “X Date”— the day when the federal government can no longer meet all its obligations in full and on time—will likely arrive in summer or early fall of 2023. BPC’s range takes into account newly available data from the Congressional Budget Office and the Treasury Department.
Beyond usual fluctuations in government cash flows, the X Date’s timing will depend heavily on 2022 tax collections in a fragile post-pandemic economy with low unemployment, persistent inflation, and recession fears. Indeed, if tax season revenues fall far short of expectations, there could even be a “too close for comfort” situation prior to quarterly tax receipts due on June 15.
“Today’s X Date range reflects, in part, the considerable uncertainty in our nation’s current economic outlook,” said Shai Akabas, BPC director of economic policy. “Policymakers have an opportunity now to inject certainty into the U.S. and global economy by beginning, in earnest, bipartisan negotiations around our nation’s fiscal health and taking action to uphold the full faith and credit of the United States well before the X Date.”
It is noteworthy that BPC is providing estimates earlier than usual this year —roughly five months from the start of BPC’s X Date range—to maximize the time policymakers have to act. The government is projected to spend more than $3 trillion and take in approximately $2.5 trillion between February and June 2023. Variation of a few hundred billion dollars in either direction would not be shocking, yet would markedly affect the X Date. As a result, the projection window is wider than usual, but will narrow as it gets closer.
“I am optimistic that today’s projection provides Congress and President Biden with a window of opportunity to come together and work out a deal,” said Akabas. “They owe it to every hardworking American and small business owner to avoid the costs and risks associated with dragging this out to the 11th hour.”
This year’s deadlock comes on the heels of congressional action in 2021 to raise the debt limit to $31.4 trillion. On January 19, 2023, the Treasury Department bumped up against this limit, thereby exhausting its traditional borrowing authority. At that point, Treasury Secretary Janet Yellen notified Congress that Treasury would begin deploying so-called “extraordinary measures” to allow the federal government to continue paying the bills. Her letter stated that those measures and existing cash on hand would sustain government operations through at least early June 2023.
If not resolved in a timely manner, this year’s debt limit showdown could lead to further downgrades of the United States’ credit rating and broad economic disruption. Although Congress has thus far avoided the worst outcomes by increasing or suspending the debt limit before reaching the X Date, previous debt limit episodes have imposed real costs on Americans. Taxpayers have been on the hook for increased interest payments on the federal debt, and investors have doubted the creditworthiness of the U.S. government. In fact, interest rates on short-term Treasury securities that mature this summer have already started to rise, demonstrating a degree of concern in the market.
BPC will update its projections throughout the year as the data warrants.
Shai Akabas is available for comment.