A Washington think tank respected for its prescient forecasts of Treasury Department finances estimated Friday that the Treasury will run out of cash and borrowing room to meet all U.S. financial obligations at some point between Oct. 15 and Nov. 4 if Congress doesn’t raise or suspend the statutory debt limit by then.
In an analysis issued Friday, the Bipartisan Policy Center said Treasury would be unable to meet about 40 percent of required payments, from Social Security payments to child tax credits, in the weeks that follow once they cross what the BPC calls the “X date.”
If that happened, BPC said the Treasury potentially could prioritize payments, including for interest owed to bondholders, and delay payments for other purposes. But the group said such calculations would involve “substantial uncertainty” and potential legal challenges from parties who don't receive payments in full and on time.
The BPC estimate is in line with several private sector forecasters. Treasury Secretary Janet L. Yellen has warned that the government will run out of borrowing room sometime during October, but hasn’t put a firm date on when that would occur.
The House currently doesn’t have any floor votes scheduled for the weeks of Oct. 4 and Oct. 11, while the Senate is not in session during that second week of October.
The House has passed stopgap funding legislation that would suspend the debt ceiling through Dec. 16, 2022, which would punt the next debt limit fight until after the midterm elections.
The BPC estimated that the debt limit would be reinstated the following day at $30.8 trillion, or $2.4 trillion above where it was reinstated on Aug. 1 after the last suspension in 2019. That figure assumes “no significant policy or economic change over the relevant time period,” the group said.
The House bill is tied up in the Senate, where 60 votes are required to advance legislation unless all senators grant unanimous consent. Republicans in that chamber say they won't provide the extra 10 votes needed if all Democratic caucus members stay united in support.
Senate Minority Leader Mitch McConnell has urged Democrats to use the budget reconciliation process to raise the debt limit without any GOP votes. Top Democrats, including House Budget Chairman John Yarmuth of Kentucky, have rejected that approach, citing several “parliamentary obstacles” to completing that process before the debt limit deadline.
G. William Hoagland, senior vice president at BPC, said the reconciliation path is “possible,” though the timetable would be “very tight.”
“In terms of timing, I don’t think there’s a problem here,” he said. “If they want to move quickly, there’s time, 10 days, 15 days, they can put together a revised budget resolution very quickly.”
Hoagland, a former top Senate GOP budget aide, said he’s not sure why parliamentary obstacles could prevent using reconciliation to raise the debt limit. Federal budget law allows lawmakers to revise the fiscal 2022 budget resolution, which Democrats are using for a sweeping filibuster-proof spending and tax package, to add similar instructions to raise the debt ceiling.
“Yes, it’s a tight schedule, but I think most probably more it has to do with politics and the fact that you’re going to have the Senate vote again on another budget resolution, and that budget resolution in the Senate may jeopardize the $3.5 trillion reconciliation instructions that they have for the Democratic agenda,” Hoagland said.
Hoagland said it’s unclear whether passing a new debt limit reconciliation bill would create a parliamentary issue if the current reconciliation bill were not passed yet.
“That is a question that has not been resolved,” he said. But he added that his sense is that Senate Parliamentarian Elizabeth MacDonough would “probably say that you would be able to continue the existing reconciliation bill ... even if you are doing a second reconciliation bill, which would be the debt limit.”
The government also faces a potential partial shutdown if the Congress does not pass a stopgap funding measure by Oct. 30. Shai Akabas, BPC’s director of economic policy, said the reduction in spending if the government shuts down would only extend the window slightly since most government spending would continue during a partial closing.
“The bottom line is that it will have some impact but not likely a significant impact, so we could be talking about a day, two days, but we don’t expect that will dramatically move the date,” Akabas said.