US on the brink of default, think tank predicts
The Bipartisan Policy Center (BPC) said on Friday the US federal government is likely to run out of borrowing room and breach the debt limit as of December 21.
“The debt limit ‘X Date’ – when the United States will no longer be able to meet its obligations in full and on time – will most likely occur between December 21, 2021, and January 28, 2022,” the Washington, DC-based think tank warned on its website.
According to Shai Akabas, director of economic policy at BPC, “Those who believe the debt limit can safely be pushed to the back of the December legislative pileup are misinformed.” He added: “Congress would be flirting with financial disaster if it leaves for the holiday recess without addressing the debt limit.”
The BPC noted that December 15 will be of particular importance. Its updated X Date range factors in the $118 billion transfer to the Highway Trust Fund that the Treasury Department has confirmed will be completed by that date. If the quarterly corporate tax receipts that are due that day come in particularly weak, according to the BPC, that could leave the Treasury Department with a dangerously low cash balance, hastening the X Date and increasing risks to taxpayers, financial markets, and the economy. It further added that with several large federal payments due in the following days, and particularly towards the end of the month, such a scenario would likely result in an X Date before New Year’s Day.
“Failing to extend the nation’s debt limit would be an unprecedented event in modern American history that carries grave risks to American taxpayers,” the think tank said.
“Failure to pay the nation’s bills on time could send immediate ripple effects throughout the global economy, particularly during a time of economic recovery and heightened uncertainty over a new Covid-19 variant.”
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