Washington, DC – The Bipartisan Policy Center estimates an elevated risk that the debt limit X Date—when the United States will no longer be able to meet its obligations in full and on time—could fall early in BPC’s range of early June to early August, specifically between June 2 and June 13. To avoid the worst risks associated with nearing or crossing the X Date, policymakers should act as soon as possible.
“Come early June, Treasury will be skating on very thin ice that will only get thinner with each passing day,” said Shai Akabas, executive director of BPC’s Economic Policy Program. “Of course, the problem with skating on thin ice is that sometimes you fall through.”
Shortly after Memorial Day, the government will begin operating with dangerously low levels of reserves as the Treasury Department steadily draws down its remaining extraordinary measures and cash on hand. Even before Treasury has fully emptied its coffers, each day in early June carries an increasing chance of defaulting on our obligations and the associated economic turbulence.
If Treasury manages to continue meeting all commitments for the next several weeks, quarterly tax revenues collected in mid-June would provide a brief respite from the danger zone. That influx of receipts would likely, though not certainly, buoy Treasury’s reserves through June 30, when approximately $145 billion in one-time, additional extraordinary measures become available by suspending investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. This additional borrowing capacity would carry Treasury into July, after which large cash flow imbalances would deplete remaining reserves and result in an X Date at some point in the weeks that follow.
“The longer policymakers wait to address the debt limit, the more likely our economic fate will be determined by external actors,” said Akabas. “Credit rating agencies, Treasury investors, and global financial markets aren’t going to wait around forever. Once things turn, the situation could deteriorate quickly and be hard to reverse, which would immediately and negatively impact American consumers and businesses.”
BPC is also releasing today updated daily cash flow illustrations for the month of June after recalibrating its revenue projections following the 2023 tax season. We will monitor new data over the coming days to gain additional clarity of the level of risk during and within the early June period.
Shai Akabas is available for comment. Find BPC’s latest debt limit analysis here.