WASHINGTON — The Bipartisan Policy Center cautioned on Thursday that it is facing difficulties projecting when the U.S. government will hit its debt limit due to ambiguities over the timeline for economic recovery and cash flows related to COVID-19 relief disbursements.
The D.C.-based think tank said predicting the “X Date” in which the country will no longer be able to meet its financial obligations “could be particularly unpredictable,” forecasting it would likely default “sometime in fall 2021” if Congress does not take action to raise the debt ceiling.
“The challenges of accurately forecasting the pandemic’s lingering effects on the economy and the ongoing federal response mean we may not have a clear picture until September, at which point Congress could have just weeks to act,” BPC Economic Policy Director Shai Akabas said in a statement.
“Policymakers seeking to mitigate risks to the full faith and credit of the United States should act sooner rather than later.”
The think tank noted that while there is uncertainty, the Treasury Department’s decision to hold $450 billion in cash on hand on Aug. 1, significantly more than the $118 billion anticipated, will help supplement its emergency borrowing authority, but is expected to be exhausted in the following months.
“The Treasury Department’s actions inadvertently bought Congress additional time, but they should not fritter it away,” Akabas continued.
“In 2019, the possibility of an earlier than expected X Date forced Congress’ hand and spurred action prior to the August recess. While this year’s timing is not necessarily the same, the uncertainty is even greater.”
Congress passed multiple COVID relief packages aimed at helping individuals and businesses stay afloat during the course of the pandemic, with Biden signing a $1.9 trillion package that passed largely along party lines in March.
The current debt limit suspension is slated to expire on July 31, with Treasury Secretary Janet Yellen urging lawmakers to act before the end of the month.
Congress has not yet set a date in which it plans to address the matter, which could become increasingly difficult as members look to address an array of other legislative matters, including a sizable infrastructure package that is expected to be voted on before the end of the month.