Debt limit

The U.S. could be weeks away from being unable to pay its bills, according to a new estimate by the Bipartisan Policy Center.  

President Biden and Republican lawmakers are nowhere near a deal to raise or suspend the debt limit, but Mr. Biden has invited congressional leaders to the White House Tuesday to talk about a way forward.

The new analysis projects the so-called “X-date” could arrive as soon as early June to early August, narrowing the organization’s previous projections. The Bipartisan Policy Center’s X-date falls closely in line with Treasury Department estimates. Treasury Secretary Janet Yellen warned congressional leaders in a letter last week that the U.S. could be unable to pay its bills as soon as June 1.

“I still don’t think now is the time for panic, but it’s certainly time to start getting concerned because we’re possibly only weeks away from the X-date,” said Shai Akabas, director of economic policy at the Bipartisan Policy Center. 

Akabas expressed concern about where discussions stand at this late date: “I think we’re really at the early stage of these negotiations between these two parties.”

Neither side has signaled a willingness to compromise heading into the high-stakes Oval Office face-off. Mr. Biden is calling on Congress to pass a bill to raise the debt limit without conditions, while Republicans are demanding debt limit legislation be coupled with spending cuts. 

The U.S. national debt has ballooned to more than $31 trillion. But raising the debt limit would not greenlight new spending – it would only allow the government to pay what it already owes and avoid a first ever default. The Treasury Department has been using so-called extraordinary measures to pay the bills since January, when the nation hit the debt ceiling. It has stretched out the nation’s solvency by taking actions like modifying investments in certain civil service health and retirement funds.

“We give a range specifically for the purpose that we don’t feel like we have the confidence to name a particular X-Date,” Akabas said. “This year, there’s a very notable pattern within that X-Date window, so there’s that early June time frame that we are concerned about, and it is a significant concern.”

The uncertainty in the Bipartisan Policy Center’s projections is a function of its reliance on estimates of the hundreds of billions of dollars in the government spends and takes in every month.

The center’s initial projections in February noted that the timing of the X-date would be highly dependent on the 2023 tax season. Soon after, many states were granted extended filing deadlines until October, which increased the odds of lower revenues in early June. Overall, receipts over the past few weeks have come in below expectations, in contrast with last year.

Incoming revenues throughout the rest of the month will affect whether the U.S. government has enough money to pay the bills and therefore the X-Date. If the U.S. can make it through the first half of June, it is slated to receive an influx of cash around June 15 with the quarterly filing deadline. That money could help the Treasury Department hold off a default through the end of the month.

Another roughly $145 billion in additional so-called extraordinary measures is set to become available June 30. If that all holds up, the Treasury Department should have enough room to pay the bills through at least early July and perhaps several weeks beyond that, the Bipartisan Policy Center projects.

The center plans to continue updating its projections in the coming days, as more data on cash flows become available.