Bipartisan think tank: Key debt limit deadline will be hard to predict

The Bipartisan Policy Center (BPC) on Thursday said that it will be challenging to predict the date by which Congress needs to act on the debt ceiling in order to prevent a default.

The “X date” on which the federal government would default on its obligations once the debt limit is reinstated in August will be harder than usual to forecast because of pandemic-related uncertainties about Treasury Department cash flows, the think tank said.

“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 news release. “Policymakers seeking to mitigate risks to the full faith and credit of the United States should act sooner rather than later.”

The current suspension of the debt limit expires after July 31, and after that time Treasury can take “extraordinary measures” to prevent a default for a short period of time if Congress doesn’t act. BPC said that it will be hard to estimate how long those measures can last. 

The think tank has estimated that Treasury would no longer be able to meet its obligations sometime in the fall. However, it said that that is a broader estimate range than they usually have at this point in the forecasting process, compared to past instances when the debt limit was set to expire.

The comments from BPC come after Treasury Secretary Janet Yellen earlier this month urged lawmakers to raise or suspend the debt limit prior to the Aug. 1 reinstatement, saying a default “would precipitate a financial crisis.”

It’s unclear when exactly Congress will take action on the debt limit. Some Republicans have indicated that they want a debt-limit increase to be paired with spending reforms.