The limit on the size of the U.S. national debt has been suspended since July 2019 but is scheduled to come back into force on August 1. If Congress does not act to address the situation, at some point in the following weeks or months the government will be unable to meet all of its obligations — a day referred to as the X Date.
On Thursday, the Bipartisan Policy Center said that absent congressional intervention, it expects the government to reach the X Date in the fall but added that current conditions make it especially difficult to predict the deadline with any precision.
“The challenges of accurately forecasting the pandemic’s lingering effects on the economy and the ongoing federal response mean we may not have a clear picture until September, at which point Congress could have just weeks to act,” Shai Akabas, the think tank’s economic policy director, said in a statement.
Given the uncertainty, lawmakers “should act sooner rather than later” to maintain the nation’s full faith and credit, Akabas added.
No plans in place: In the past, when faced with constraints imposed by the debt limit, the Treasury has deployed what it calls extraordinary measures to keep payments flowing. Crucially, Treasury officials said in May that they expect to have about $450 billion in cash in hand on August 1, which BPC estimates will last until the fall — at which point lawmakers would be forced to act in a hurry.
House Budget Chairman John Yarmuth (D-KY) told Roll Call last week that lawmakers do not yet have a plan on how to approach the issue. One option would be to use the still-developing budget proposal in the House to declare that the debt has been raised through next year; the Senate would then need to pass legislation confirming the increase and President Joe Biden would need to sign it.
Another option would be to use the reconciliation process to raise the debt, but that could be risky given the uncertain timeline involved.
The bottom line: Treasury Secretary Janet Yellen warned in June that failure to act on the debt limit could produce “catastrophic” results. Thursday’s announcement from the Bipartisan Policy Center could add some degree of urgency to lawmakers’ efforts to raise or resuspend the debt limit before they leave town in August for their summer recess, which extends into mid-September.