It is known as the “X-date,” the day when Washington could run out of cash to pay the government’s bills on time. It heralds a fiscal doomsday, and a new warning issued Friday by the nonpartisan Congressional Budget Office said it could arrive as soon as next month.
At the heart of the nation’s latest fiscal stalemate is an increasingly important and anxiety-inducing question: How much time, exactly, does Congress have to act? Even the Biden administration is not completely sure about how long it can avoid default now that it has reached the debt ceiling, which caps the amount that the United States may borrow to cover its own bills.
In its latest projection, CBO sounded the alarm about a “significant” risk that the country could reach the X-date in early June. The new report aligned the Capitol’s leading budget-keeper with the Treasury Department, which earlier this month said the deadline could fall “as soon as” June 1, roughly 20 days away.
But CBO — like countless others in the private sector and federal government — still acknowledged its projections are imprecise. The uncertainty stems largely from federal tax collections, which so far are lower than expected, cutting deeply into the time Congress and the White House have to strike a deal. The government hit the current debt limit of $31.4 trillion in January and has relied on tactics known as “extraordinary measures” to hold off a crisis ever since.
The unsure timeline only adds to the political challenge facing President Biden and House Speaker Kevin McCarthy (R-Calif.), who met at the White House on Tuesday. They were supposed to meet again Friday, as Republicans maintain their refusal to raise the debt ceiling without massive spending cuts. But the two sides postponed the meeting into early next week, as staff-level talks continue, White House press secretary Karine Jean-Pierre told reporters.
In a city that tends to lurch from crisis to crisis — often waiting to confront its political differences until the clock has nearly expired — the fluidity could carry immense risks. A matter of a few days might mean the difference between a last-minute, economy-saving deal and the first-ever federal default, a calamity that could hammer the global financial system.
“We’re pretty confident Treasury is going to be on thin ice in early June, we just don’t know how thin that ice is,” said Shai Akabas, the director of economic policy at the Bipartisan Policy Center, in a recent interview.
In its analysis Friday, the CBO pointed to a variety of hard-to-predict factors: How strong would tax receipts prove to be after months of lower-than-expected revenue? And could federal cash flows remain just robust enough through May to finance a few more weeks of federal spending, adding to the time lawmakers have to craft a deal?
The report also offered a glimmer of hope: If Treasury does collect enough money to sustain the government until June 15, it could give Congress an extra month to act. That’s because quarterly taxes, paid largely by businesses, are due that day — and the added cash would open the door for the Biden administration to take additional accounting maneuvers, delaying payments it’s supposed to make on June 30.
As a result, the moves could “probably allow the government to continue financing operations through at least the end of July,” the CBO said.
The lack of a hard deadline has fed into the acrimony and distrust between the two parties. Some conservative Republicans, in particular, have said for months they felt Treasury Secretary Janet L. Yellen had exaggerated the risk of a default in June in a bid to put pressure on the House GOP majority. The agency has urged Congress to take swift action out of a concern that a default could tip the country into a recession.
“She’s gonna play it out now, saying, ‘It’s a crisis. The day is here,’” said Rep. Ralph Norman (R-S.C.), a member of the House Freedom Caucus, a far-right bloc.
Last month, McCarthy secured House passage of legislation that would raise the debt ceiling into next year. But it would also reset federal spending to the levels adopted two years ago while rolling back federal initiatives to combat climate change, pursue tax cheats and ease college students’ debts. Biden immediately threatened to veto the proposal, stressing the United States should raise the debt ceiling without condition or delay given the risks to the economy.
Instead, Biden has urged Republicans to postpone any spending discussions until the fall, when Congress must pass a series of bills to fund the government anyway before the fiscal year ends on Sept. 30. GOP leaders have rejected that approach, leaving Democrats in the Senate — a chamber they narrowly control — unable to pass their own bill.
Following the hour-long discussion in the Oval Office on Tuesday, the House speaker told reporters there had been no “movement” toward a deal, clinging to the GOP’s plan to tie an increase in the debt ceiling to significant spending cuts. The president hit the road a day later — traveling to a GOP-held congressional district in New York — to accuse Republicans of holding the economy hostage.
Back in Washington, congressional aides and White House officials have continued huddling in private all week, hoping to pull the country back from the fiscal brink. On Thursday, House Minority Leader Hakeem Jeffries (D-N.Y.) even described the negotiations as “very productive,” though he still attacked Republicans for trying to force Democrats to “absorb dramatic, extreme, right-wing ideological cuts.”
McCarthy, for his part, told reporters that their planned Friday meeting was postponed because “all the leaders decided it was probably in the best of our interest” to let staff keep talking before they gathered again. The House speaker’s top aides said they remain focused chiefly on four key areas in their recently passed bill: cutting spending, rescinding previously authorized coronavirus aid, easing the way for new oil and gas drilling and imposing new work requirements on welfare recipients, including Americans on food stamps and Medicaid.
“If I were the person trying to lead a successful negotiation, I would grab those four and start with those,” said Rep. Garret Graves (R-La.), who has been tapped by McCarthy as a key emissary in the debt ceiling debate.
Graves also signaled that Republicans could be open to increasing the debt ceiling for two years, but he said of the White House: “You’re going to have to put more savings on the table.”
In recent days, the White House has signaled some willingness to haggle, even if it has rejected the idea that it is engaged in negotiations. Biden’s top aides released their own blueprint for permitting reform, for example, while the president signaled an openness to taking a look at the funds leftover from previous pandemic aid packages. But the president in the past has publicly rejected other GOP demands, including work requirements that could result in millions of low-income Americans losing benefits.
With the clock ticking, and tensions running high, the fast-approaching deadline has raised the possibility that Congress could adopt a short-term extension in the debt ceiling to ensure there’s enough time to strike a deal — an idea Biden has not ruled out.
But Republicans on Thursday that there would be significant obstacles even to a temporary fix — stressing again that Biden first had to agree to key policy concessions.
“I’ve been in meetings with members who have made it very clear that a short term deal would not come without a cost,” Rep. Dusty Johnson (R-S.D.) told reporters on Thursday.