U.S. may default on its debt half a month earlier than expected, new analysis shows
The U.S. government may default on its debt as soon as Feb. 15, half a month earlier than widely expected, according to a new analysis adding urgency to the debate over how to raise the federal debt ceiling.
The analysis, by the Bipartisan Policy Center, says that the government will be unable to pay all its bills starting sometime between Feb. 15 and March 1.
The government hit the $16.4 trillion statutory debt limit on Dec. 31 , but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.
The Treasury has said that the accounting schemes, known as “extraordinary measures,” ordinarily would forestall default for about the first two months of the year, though officials were clear that they could not pinpoint a precise date because of an unusual amount of uncertainty around federal finances.
“Our numbers show that we have less time to solve this problem than many realize,” Steve Bell, senior director of economic policy at the Bipartisan Policy Center, said in a statement. “It will be difficult for Treasury to get beyond the March 1 date in our judgment.”
The fast-approaching deadline to raise the debt limit is likely to be Washington’s next fiscal battleground. Republicans say they plan to use the occasion to demand deep federal spending cuts, with House Speaker John A. Boehner (Ohio) insisting on a dollar reduction in federal spending for every dollar increase in the nation’s borrowing limit.
But the White House says President Obama will not negotiate this point, because the debt ceiling represents a limit to obligations that Congress already has promised to pay.
“What he will not do — as he has made clear — is negotiate with Congress over Congress’s sole responsibility to pay the bills that Congress has already incurred,” White House press secretary Jay Carney said Monday. “Nobody forced Congress to rack up the bills that it incurred. And it is an abdication of responsibility to say that we’re going to let the country default and cause global economic calamity simply because we’re not getting what we want in terms of our ideological agenda.”
The Bipartisan Policy Center’s debt-limit deadline is based on several assumptions, two of which conceivably could change the calendar.
One is that the confusion around end-of-year tax policy could lead to delays in the filing of taxes and refunds, throwing a curveball into projections about the nation’s finances.
The other is the overall pace of economic growth; faster growth tends to lift tax receipts.
If Congress does not raise the debt ceiling by the deadline, the White House has said that the nation probably will default. In a previous episode — in the summer of 2011 — officials determined that the best course would be to withhold all of a given day’s federal payments until enough money became available to pay them.
Sign up for The Showdown, a daily guide to Washington negotiations over the fiscal cliff.