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There is a risk of a “too close for comfort” scenario involving the U.S. government’s ability to pay its bills on time before mid-June, a closely followed Washington think tank said Wednesday.
In a new estimate, the Bipartisan Policy Center said the so-called “X date” — the day when the federal government can’t meet all its obligations on time and in full — will likely arrive in summer or early fall of 2023.
But that date will depend heavily on 2022 tax collections that are due on April 15, according to the estimate.
“If tax season revenues fall far short of expectations, there could even be a ‘too close for comfort’ situation prior to to quarterly tax receipts due on June 15,” the center warned.
The policy center’s estimate arrives amid an ongoing standoff between President Joe Biden and congressional Republicans. Biden and his fellow Democrats are demanding the federal borrowing limit be lifted without preconditions. House Speaker Kevin McCarthy and his fellow GOP lawmakers, on the flip side, want spending cuts in exchange for increasing the debt limit.
Analysts say the standoff over the U.S. borrowing limit threatens to shake U.S. government debt markets
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later this year, if Washington can’t strike a deal and prevent a default. That would likely spill over into the stock market
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What’s more, retiree benefits and access to medical care through Medicare and Medicaid could be disrupted.
From the archives (Nov. 17, 2021): Social Security, Medicare, and other key programs on the line
“Today’s X-date range reflects, in part, the considerable uncertainty in our nation’s current economic outlook,” said Shai Akabas, the Bipartisan Policy Center’s director of economic policy.
“Policymakers have an opportunity now to inject certainty into the U.S. and global economy by beginning, in earnest, bipartisan negotiations around our nation’s fiscal health and taking action to uphold the full faith and credit of the United States well before the X date,” Akabas said, in a statement.
The new X-date estimate came after last week’s estimate from the Congressional Budget Office, which also said the U.S. government will hit its debt limit and risk default sometime between July and September if Congress doesn’t act.
Now see: CBO warns of potential for U.S. default between July and September, as debt-limit standoff persists
In January, Treasury Secretary Janet Yellen started to use “extraordinary measures” to keep the U.S. from defaulting. Those typically have included disinvesting various government trust funds like employee pension funds.
Analysts use words like “catastrophic” and “unprecedented” when describing what could happen if the U.S. actually defaults. David Kelly, chief global strategist at JPMorgan Funds, said in a note that an actual default on Treasurys could mean that investors end up having “lost faith in future payments on U.S. debt.”
Victor Reklaitis contributed to this report.
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