Debt default possible in June as Biden, McCarthy standoff persists, warns think tank.

U.S. Government at Risk of Defaulting on Payment Obligations

The Bipartisan Policy Center (BPC) has issued a warning that the U.S. government could default on its payment obligations between early June and early August if changes aren’t made. The group’s May 2023 debt-limit analysis report, released on May 9, cites a decline in tax revenue as the reason for their conclusion on a default date.

X-Date Approaching

The BPC’s projections for the so-called X-date, which is when the government will run out of money to pay its obligations, are in line with those issued by Treasury Secretary Janet Yellen and the Congressional Budget Office. This will likely increase the pressure on House Republicans and President Joe Biden to find a solution to the debt-ceiling problem with just a few weeks left.

Debt-Limit Disputes in Congress

The BPC closely monitors debt-limit disputes in Congress and estimated in February that the X-date could occur between summer and early autumn. However, they now expect a default much sooner if Congress fails to raise the $31.4 trillion U.S. borrowing limit.

Payment Delays Increase Likelihood of Cash Shortfall

The think tank concluded that payment delays granted to taxpayers in some severe storm disaster areas, such as much of California and certain counties in Georgia and Alabama, until Oct. 16 have increased the likelihood of a cash shortfall by early June.

Extraordinary Cash Management Measures

The BPC stated in its analysis that if tax revenues enable the Treasury Department to meet obligations through mid-June, quarterly estimated tax payments due on June 15 could likely sustain the government through June 30. At the end of June, the Treasury could borrow an extra $143 billion by stopping the reinvestment of maturing investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. This is one of the remaining extraordinary cash management measures that could be used.

Don’t wait until it’s too late. Stay informed on the latest developments regarding the U.S. government’s debt-limit disputes.

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