Impending US Default Looms as Congress Heads for Summer Break, Warns Think Tank

The Bipartisan Policy Center has warned that the United States might default on its debt between August 15 and October 3 if Congress does not raise or suspend the debt limit. This projection, released Wednesday, offers a slightly later timeline than their previous estimate, which indicated a possible default as early as July.

Factors contributing to this delay include higher-than-anticipated quarterly tax revenues and a stable economic outlook. The center’s assessment aligns with the Congressional Budget Office’s recent estimate, which also sees the X-date occurring between mid-August and the end of September.

Despite the revised timeline, the center continues to urge Congress to tackle the debt limit urgently. “Congress must address the debt limit ahead of the August recess,” stated Margaret Spellings, president and CEO of the Bipartisan Policy Center. She emphasized the need for swift action to maintain financial stability and assure global markets of the U.S.’s commitment to fiscal responsibility.

Both the House and Senate are expected to be in recess from August 4 to September 2. Without decisive action, the U.S. risks defaulting on its debt for the first time, potentially triggering a worldwide financial crisis.

As of June 18, the federal treasury holds $384 billion in cash, with an additional $89 billion available through “extraordinary measures.” The precise default date will be influenced by government spending during July and August, which typically records significant deficits.

Should the government manage to extend beyond the debt limit until quarterly tax receipts are due on September 15, this could provide further relief into early October. Variables such as fluctuating tariff revenues and the potential impact of summer hurricanes might also play a role in determining the X-date.

Meanwhile, Congressional Republicans are racing to finalize a reconciliation package for President Donald Trump that raises the debt ceiling significantly. The House version proposes a $4 trillion increase, while the Senate plan suggests a $5 trillion hike. However, Republican senators face challenges with some provisions that may not comply with the fast-track budget reconciliation rules.

The reconciliation process allows Republicans to pass the bill with a simple majority, bypassing the need for Democratic votes. Complications remain as discussions continue regarding provisions that may benefit rural hospitals and other elements of the budget.

After the Senate vote, any approved version must be reconciled with the House before it can reach the President’s desk for signing.