The US will likely start to default on its obligations over the summer or in the early fall if Congress doesn’t address the debt ceiling before then, according to a new analysis released Wednesday. The timing should become clearer after the 2022 tax revenues come in this spring.
The new projection from the Bipartisan Policy Center is in line with a forecast issued last week by the Congressional Budget Office, which said the default could take place between July and September. Meanwhile, Goldman Sachs expects the so-called X Date to arrive in early to mid-August.
The center’s estimate is also “roughly consistent” with the forecast provided by the Treasury Department when it announced last month that the nation had hit the $31.4 trillion debt ceiling, said Shai Akabas, the center’s director of economic policy.
At that time, Treasury Secretary Janet Yellen said that the department would start taking extraordinary measures to allow the federal government to continue paying its bills in full and on time. The effort would last through June 5, though she also noted that it’s unlikely that cash and extraordinary measures would be exhausted before early June. However, she stressed that there is “considerable uncertainty” around that forecast.
The projections give lawmakers and the Biden administration a sense of when they must reach an agreement on resolving the borrowing limit to avoid a catastrophic default. The forecasts are also meant to spur action, though little progress has been made so far.
Pinpointing the timing is difficult because it depends heavily on 2022 tax collections in April. The center, CBO and others expect to issue updated estimates in May when the revenue picture becomes clearer.
This tax season is particularly hard to predict because it follows strong 2021 collections, which were boosted by pandemic relief efforts,…
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