The Bipartisan Policy Center, a Washington think tank, on Tuesday backed Treasury Secretary Janet Yellen’s warning that the U.S. faces default as soon as early June if Congress does not act to raise the debt ceiling.
That deadline is a revision from the think tank’s forecast last summer, when it predicted the government had at least until the third quarter of 2023 before the so-called “X-Date”—the day when the federal government can no longer meet all its obligations in full and on time—would arrive.
It’s also an earlier deadline than the non-partisan Congressional Budget Office predicted on February 15. The CBO said the government likely had until sometime between July and September before it faced debt default.
The federal government hit its $31.4 trillion debt limit on January 19. Earlier that month, Yellen warned Congress that “extraordinary measures” taken to prevent debt default would likely “be exhausted before early June.”
In a speech on Valentine’s Day, Yellen warned that a debt default would spell “catastrophe.”
“Household payments on mortgages, auto loans, and credit cards would rise, and American businesses would see credit markets deteriorate,” she said. “On top of that, it is unlikely that the federal government would be able to issue payments to millions of Americans, including our military families and seniors who rely on Social Security.”
According to Moody’s Analytics, a stock market plunge as a result of debt default could wipe out 6 million jobs and $15 trillion in wealth.
Yet President Biden and House Speaker Kevin McCarthy (R-CA) have met only once earlier this month to discuss the debt limit. Expectations are low for quick progress as McCarthy and other Republican lawmakers push for steep spending cuts in exchange for agreeing to raise the debt ceiling.
“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,” said Shai Akabas, the Bipartisan Policy Center’s director of economic policy, on Tuesday.
