The latest forecast is ‘a clear warning sign,’ the Committee for a Responsible Federal Budget said.
The United States could risk default in August or September without a debt-ceiling agreement between the White House and lawmakers, the Congressional Budget Office (CBO) said on March 26.
A new report by the nonpartisan budget watchdog projected that Congress would need to reach a deal or suspend the debt ceiling by August or September. The CBO noted that the timing could change based on revenues or outlays.
“If the debt limit is not raised or suspended before the extraordinary measures are exhausted, the government will be unable to pay all of its obligations,” the report stated. “As a result, it would have to delay making payments for some activities, default on its debt obligations, or both.”
The so-called X-date—an estimated date when the Treasury Department’s extraordinary measures used to meet financial obligations are exhausted—could be as early as May “if the government’s borrowing needs are significantly greater than CBO projects,” the report notes.
The Bipartisan Policy Center on March 24 projected that the X-date would occur between mid-July and early October. The organization added that there is a higher risk of the X-date happening “in early June” if tax revenues fall short of expectations.
The debt limit, reinstated on Jan. 2, is the maximum amount of money the government can borrow to cover its obligations, such as interest payments and paying for public services. It was suspended in June 2023 as part of a bipartisan arrangement between then-President Joe Biden and then-House Speaker Kevin McCarthy (R-Calif.).
Since Jan. 21, the Treasury has been taking extraordinary measures to avoid breaching the debt ceiling. These actions include prematurely redeeming existing investments, tapping into its bank account at the Federal Reserve, and suspending investments in federal retirement funds.
Treasury Secretary Scott Bessent has also extended the debt issuance suspension period until the end of June.
Bessent has also acknowledged the uncertainty surrounding the length of time the Treasury’s extraordinary measures could last. In a March 14 letter to House Speaker Mike Johnson (R-La.), Bessent said he expects an update in the first half of May after most receipts from the April income tax filing have been received.
“I respectfully urge Congress to act promptly to protect the full faith and credit of the United States,” he said.
According to the CBO report, the Treasury “has no room to borrow under its standard operating procedures” because it already hit the current debt limit of $36.1 trillion.
By Andrew Moran
