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How Debt Limit Could Impact U.S. Government Payments

Thursday, August 24, 2017

Washington, D.C.– The Bipartisan Policy Center today released a new analysis on the debt limit and the options that Treasury faces if policymakers take no action and the government is unable to fully pay its bills.

The analysis provides a look at the daily cash flow situation in October and which government programs could be affected if there is no action on the debt limit before reaching the “X Date” – the day when the federal government is not able to pay its bills in full and on time. BPC estimates the “X Date” could be reached in early or mid-October.

“The markets have already started to flash warning signs. In July, 3-month Treasury bill rates rose higher than 6-month bill rates for only the third time in the last decade,” Shai Akabas, economic policy director at BPC, said. “This is a clear signal that investors are worried policymakers will not raise the debt limit in time.”

The analysis examines the implications of two potential options for the Treasury if the United States is forced to default on some of its obligations: prioritizing which bills get paid first and waiting to accumulate enough cash flow to make a full day’s payments.

BPC will hold a media call with Shai Akabas and G. William Hoagland, senior vice president, at 10 a.m. ET today. For call-in details please email Toby Zakaria at [email protected].

KEYWORDS: BILL HOAGLAND, DEBT LIMIT, DEPARTMENT OF TREASURY, SHAI AKABAS