Debt default would happen between mid-December and mid-February: analysis

Department of Treasury in Washington, D.C., seen on June 3
Greg Nash

The U.S. most likely would default on its debt sometime between mid-December and mid-February absent additional congressional action on the debt limit, according to a projection released Friday by the Bipartisan Policy Center (BPC).

BPC gave a two-month window for the “x-date,” the date when the U.S. would no longer be able to pay all of its bills on time.

The projection comes after Congress earlier this month voted to raise the debt limit by $480 billion, following a standoff between Democrats and Republicans in the Senate.

Shai Akabas, BPC director of economic policy, said in a statement that the deal for a short-term debt limit increase “did stave off catastrophe, but it was only a temporary fix.”

“With another debt limit crisis on the horizon in a few short months, the clock is ticking for Congress to once again protect the full faith and credit of the United States,” Akabas added.

BPC also said that enactment of the Senate-passed bipartisan infrastructure bill could move up the date when the U.S. would be unable to meet its obligations, because the bill includes a transfer from the Treasury Department’s general fund to the highway trust fund.

“House passage of the Bipartisan Infrastructure Framework might result in a large transfer to the Highway Trust Fund that would accelerate the debt limit X Date,” Akabas said.

Treasury reached the $28.9 trillion debt limit last Friday and is currently using “extraordinary measures” and cash on hand to prevent a default, according to BPC. The U.S. has never defaulted on its debt, and a default could have serious financial consequences.

Congress could face challenges in increasing or suspending the debt limit. Republicans want Democrats to raise the debt limit on their own using the budget-reconciliation process, but many Democrats would prefer that the debt limit be addressed on a bipartisan basis.

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