The United States faces a default sometime between Dec. 21 and Jan. 28 of next year if Congress does not act to raise or suspend the debt ceiling, the Bipartisan Policy Center warned on Friday.
The projection was a more narrow window than the nonpartisan think tank previously provided last month and the group suggested that the actual deadline, or X-date, could be in the earlier end of that range.
Democrats and Republicans appear to have tempered their tone around the latest debt limit standoff this time around, yet there is no current plan for lifting the borrowing cap. Republicans continue to insist that Democrats must act alone to address the issue, while Democrats have countered that raising the borrowing cap is a shared responsibility given that both political parties have incurred big debts over the last several years.
“Those who believe the debt limit can safely be pushed to the back of the December legislative pileup are misinformed,” said Shai Akabas, BPC’s director of economic policy. “Congress would be flirting with financial disaster if it leaves for the holiday recess without addressing the debt limit.”
Treasury Secretary Janet L. Yellen warned lawmakers in November that the United States could be unable to pay its bills soon after Dec. 15.
During testimony before the Senate Banking Committee this week, she underscored the urgency of the matter.
“I cannot overstate how critical it is that Congress address this issue,” Ms. Yellen said. “America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery.”
After approaching the first default in American history, Congress in October raised the statutory debt limit by $480 billion, an amount the Treasury Department estimated would allow the government to continue borrowing through early December.
The Bipartisan Policy Center said that there is additional uncertainty surrounding the debt limit this year because of the pandemic and the various economic relief programs that are still ongoing.
Dec. 15 is particularly important because the Treasury Department is required to make a $118 billion payment to the Highway Trust Fund. If corporate tax receipts that are due that day come in weak, Treasury could face a cash crunch and the United States would be unable to fully meet all of its obligations like paying out Social Security and funding military paychecks.
The Congressional Budget Office said earlier this week that it expected that Treasury might run out of cash by the end of December if Congress fails to act. The C.B.O. suggested, however, that Treasury might be able to defer some Highway Trust Fund payments, which were mandated in the recently passed infrastructure law, potentially staving off a default until sometime in January.