The United States could face a debt-ceiling crisis as early as mid-February, according to an expert report out Monday.
The Bipartisan Policy Center (BPC) estimates that the nation will begin defaulting on its payment obligations between Feb. 15 and March 1, unless Congress raises the $16.4 billion debt ceiling.
Many Republicans want to use the threat of default to force the White House to cut spending and trim entitlement benefits. President Obama has demanded Congress raise the nation's borrowing limit without tying it to spending cuts.
The new report says that after mid-February, the Treasury Department will run out of “extraordinary measures” it can use to stave off default.
Officially, the U.S. reached the debt ceiling on New Year’s Eve. At that point, Treasury Secretary Timothy Geithner began implementing the special measures.
BPC estimates that Treasury has about $200 billion in wiggle room, by not reinvesting revenue in the Federal Employees’ Retirement System Fund and Exchange Stabilization Fund.
During this period, Treasury does not have the option to forgo investment in the Civil Service Fund and Postal Fund. It also has a large number of payments due in February.
After the Feb. 15 to March 1 deadline, Treasury will have to begin prioritizing payments. The BPC on Monday outlined how contentious the process will be. Choosing to pay entitlement benefits could mean worker salaries go unpaid once the crisis hits, while prioritizing salaries and benefits could mean tax refunds are delayed.
The debt-ceiling deadline coincides with the start of $85 billion in budget sequestration cuts, delayed from Jan. 1 by the fiscal-cliff deal, and it comes just as the annual budget season usually begins with the release of the president's annual budget. Democrats expect Obama to lay out a method for replacing the sequester with a combination of additional tax increases and spending cuts.
Obama has said he will not allow Republicans to block a debt-limit hike by demanding spending cuts.
"I will not compromise over is whether or not Congress should pay the tab for a bill they’ve already racked up," Obama said in his weekly address on Saturday, warning Republicans that failing to raise the limit would be "catastrophic."