U.S. Could Default on Debt as Early as Summer, New Estimate Says

WASHINGTON — The United States faces a default sometime this summer or early fall if Congress does not raise or suspend the debt ceiling, a Washington think tank warned on Wednesday.

The projection from the Bipartisan Policy Center is the latest estimate of when the government could run out of cash to pay its bills. The nation, which borrows huge sums to help pay for everything from military salaries to Social Security benefits, hit its $31.4 trillion borrowing cap on Jan. 19. Since then, the Treasury Department has been employing what are known as extraordinary measures to ensure that the government has enough to pay what it owes, including payments to bondholders.

“We anticipate that those emergency measures, as well as the cash that Treasury has on hand, will most likely be exhausted at some point during the summer or early fall,” Shai Akabas, the center’s director of economic policy, said during a briefing on Wednesday morning.

Last week, the nonpartisan Congressional Budget Office projected that the department’s ability to prevent the United States from defaulting on its debt could be exhausted between July and September. That estimate was slightly more favorable than what Treasury Secretary Janet L. Yellen suggested when she told Congress last month that her department’s ability to keep financing the country’s obligations could be exhausted in June.

The day when the United States runs out of cash — known as the X date — depends largely on how much the Treasury Department collects in 2022 tax revenue, the Bipartisan Policy Center said. The group warned that moment could be “too close for comfort” given the vagaries around tax receipts.

“There is a possibility that the cash balance in early to mid-June will be so low that it will necessitate action,” Mr. Akabas said. He added that given “the considerable uncertainty in our nation’s current economic outlook,” it was impossible to know for certain when the X date might happen.

“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,” he said.

Ms. Yellen’s extraordinary measures to keep the government running have included redeeming some existing investments and suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Once those measures are exhausted, the United States will need to borrow more money or face default. She has urged Congress to raise or suspend the debt limit.

It remains unclear how quick or easy it would be to do that. Republican lawmakers have insisted that President Biden agree to undefined spending cuts to win their votes to raise the cap, arguing that the borrowing binge is putting the United States on a path to fiscal disaster. Mr. Biden has insisted that he will not negotiate spending cuts as part of any debt limit legislation, saying that the cap has to be raised to fund obligations that Congress — including Republicans — have already approved.

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