The U.S. is on track to default on the national debt sometime between Oct. 15 and Nov. 4 if Congress is unable to raise the federal debt ceiling, according to a forecast released Friday by the Bipartisan Policy Center (BPC).
BPC’s new projections narrowed their expected window in which the U.S. is likely to hit the “x-date,” the day when the Treasury Department runs out of cash to meet the country’s obligations.
The U.S. has never defaulted on its debt, and experts say doing so could cause catastrophic damage.
“What Treasury would do in that situation is uncertain. We've never been there before,” said Shai Akabas, BPC’s director of economic policy. “What we do know is that the risks would be significant and the costs potentially extremely high.”
The bipartisan think tank estimated earlier this month that the x-date would arrive sometime between mid-October and mid-November.
The Treasury Department is currently using “extraordinary measures” to keep the country current on its bills. Raising or suspending the debt limit does not directly affect the size of the national debt. Instead, it allows the Treasury to borrow more money to pay expenses already approved by several presidents and lawmakers.
If Treasury is unable to borrow more money after it exhausts extraordinary measures, Akabas said it would have a range of highly risky options and potentially ineffective options to dampen the blow. He added that the Treasury would be unable to pay roughly 40 percent of the payments due after the x-date and would be forced to prioritize certain debts over others.
“Once this spreads throughout the economy, if it goes on for long enough, it could lead to lawsuits of people claiming that some people are getting paid before others, and we don't even know that this is operationally possible,” Akabas said.
“The idea that on a dime, the Treasury Department can flip and start making tens of millions of payments and not making tens of other millions of payments, and have that go off in some type of seamless way is, I believe, a little far-fetched.”
The Senate is set to vote Monday on a House-passed bill that would raise the debt limit and extend funding for the federal government past Sept. 30. But the bill is expected to fall to a Republican filibuster after GOP senators vowed they would oppose any bill that would keep the U.S. from defaulting on debt both parties wracked up.
Republicans have insisted that Democrats pass an increase or suspension of the debt ceiling through their pending multitrillion-dollar infrastructure and social services bill, which they are attempting to pass through budget reconciliation, which only requires simple majorities in each chamber to pass a bill. Democrats would need near-unanimous support within the party to do so, and risk missing the x-date if the broader infrastructure bill isn’t ready for the floor.
BPC senior vice president Bill Hoagland said House Democrats would likely have enough time to amend the current budget resolution — the vehicle for the massive spending bill — to include a debt ceiling hike in time to avert a crisis. But he warned that Democrats had little time to waste with the x-date approaching and Republicans refusing to blink.
“That budget resolution in the Senate may jeopardize the [$3.5 trillion] reconciliation instructions that they have for the Democratic agenda. But in terms of timing, I don't think there's a problem here if they move quickly,” Hoagland said.